AVA JVA Compostela Valley

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DAR-Policy and Strategic Research Service (PSRS), July 2005 1

CASE STUDY ON JOINT VENTURE ARRANGEMENT:

TAGDANGUA DEVELOPMENT CORPORATION

(TAGDECOR)IN BARANGAY TAGDANGUA, PANTUKAN, COMPOSTELA

VALLEY (Banana)

DEPARTMENT OF AGRARIAN REFORM

Policy and Strategic Research Service

Economic and Soc io-Cultural Research Division

J uly 2005




TABLE OF CONTENTS

Page

I. Profile of the Study Area

A. Provincial 1B. Municipal 4C. Barangay 5

II. Historical Background of Ownership of the Land 6

III. The Tagdangua CARP Beneficiaries Cooperative (TCBC) 7and the Investor, The Mabini Industrial Tree Plantation Incorporated (MITPI)

IV. The Establishment of Tagdangua Development 9Corporation (TAGDECOR)

V. The Tagdangua Development Corporation 10 (TAGDECOR): The Joint Venture Corporation

VI. The Status of TAGDECOR 15

VII.

Problems Encountered in the Operation of the 16 Joint Venture Agreement

VIII. Factors that Contributed to the Successful 18

Establishment of TAGDECOR

IX. Socio-Economic Benefits Derived by the ARBs 19

from the Agribusiness Venture Arrangement

X. Development of the Capability of ARBs 21

XI. Perception of ARBs and Investors in Entering Into 22 an Agribusiness Venture Arrangement

XII. Future Plans for TAGDECOR 23

XIII. Lessons Learned 23

XIV. Implications and Recommendations 24




CASE STUDY ON JOINT VENTURE AGREEMENT:TAGDANGUA DEVELOPMENT CORPORATION (TAGDECOR):

BARANGAY TAGDANGUA, PANTUKAN, COMPOSTELA VALLEY(BANANA)

I. Profile of the Study Area

A. Provincial1

Land Area and Population

Compostela Valley Province is the 78th province in the country. It was carved out

of Davao Del Norte by virtue of Republic Act No. 8470, signed by President Fidel V.Ramos on January 30, 1998. On March 7 of the same year, the law was ratified

through a plebiscite conducted in the 22 municipalities of the mother province.

The province has a total land area of 4,666.93 km2. About 2,062.01 km2 or 44.18percent of the total provincial area is utilized for forestland, the predominant land

use. This is followed by agriculture which accounts for 1,750.21 km2 or 37.50percent of the total land area of the province. Other land uses are specific tomining/quarrying, grassland/pasture, industrial, tourism and other uses whichaccounts for 811.56 km2 or 17.39 percent, while built-up areas accounts for 43.15

km2 or 0.92 percent of the total provincial land area.

The total population of Compostela Valley Province in 1995 reached 520,110. Thiswas 11.30 percent of the total population of Southern Mindanao. The 1995population of the province increased by 53,824 over the 1990 census figure of466,286 showing an increase of 11.54 percent and an average growth rate of 2.07

percent. For the same period, the population of Compostela Valley Province wasestimated at 28 percent urban which indicates that for every 100 persons, 28 areliving in the urban area.

Out of the total population of the province in 1995, 271,771 are males and248,339 are females. The working population or age group 15 to 64 registered a

total number of 290,607 of which 154,282 are males and 136,325 are females.

Agricultural Economy

The province has a predominantly agricultural economy. A large portion of its landarea is used for agricultural activities with rice, corn, banana and coconut beinggrown as major crops. It has a great potential for food production. However, much

1 /Source:

Provincial Comprehensive Development Plan/Provincial Land Use Plan/Provincial PhysicalFramework Plan (PCDP/PLUP/PPFP for CY 2000-2010).




still has to be done to attain food self -sufficiency vis-à-vis the development ofother major crops.

Crops

Compostela Valley Province allotted 143,267.22 hectares to agricultural cropproduction of which 18,325.47 are for rice, 25,083.10 for corn, and 99,858.65 forvarious crops such as those belonging to industrial crops, root crops, vegetable

crops, and other fruit trees. This total area constitutes 30.70 percent of the totalland area of the province of which rice crop area is 3.93 percent, corn crop area is5.37 percent and areas for various agricultural crops is 21.40 percent.

As of 1998, the province had 13,194.47 hectares planted to rice, of which9,033.11 hectares were irrigated while 4,161.36 hectares were rainfed. Theirrigated areas cultivated for rice constituted 6.31 percent to the total agricultural

land devoted to crop production. On the other hand, the rainfed areas cultivatedfor rice constituted 2.90 percent.

Corn production covered 18,365.55 hectares of which, 16,578.10 hectares wereplanted to white corn variety and 1,787.45 hectares to yellow corn variety. Whitecorn area constituted 11.57 percent to the total agricultural land devoted to crop

production while yellow corn area occupied 1.25 percent.

The coconut production utilized 24,717.24 hectares which constituted 17.25

percent to the total agricultural land devoted to crop production.

On banana production, 5,998.50 hectares were planted in the same period, whichconstituted 4.19 percent to the total land area devoted to crop production.

The industrial crops were grown in 39,417.06 hectares or 27.51 percent of thetotal land area devoted to crop production while root crops, vegetables, and other

fruit crops were planted to 5,835.19 hectares or 5.43 percent.

Total irrigated area in the province is 13,854.00 hectares of which 1,747.00 areplanted with banana. The remaining area is devoted to rice.

Livestock

Livestock and poultry raising in the province are predominantly backyard.Commercial piggeries and poultry farms constitute only 0.10 percent of the total

production. In 1998, commercial raisers produced 1,966 heads of swine and cattlewhile backyard raisers produced 1,853,699 heads.

While there is a deficit in terms of production of meat products and related food

items, the sizeable capital investment needed for commercial production preventsstakeholders from venturing along this line of business. The total deficit of

6,498.59 metric tons of poultry eggs, poultry meat, beef, and swine meat in 1998




was filled in by supplies coming from neighboring provinces of Region XI, RegionXII and Region X. Only carabeef was produced with supply higher than demand

with 175.64 metric tons surplus during the same period.

Fishery

The fishery production of the province in both marine and aqua inland fishingareas is likewise insufficient in relation to the demand needs of the province. The

total production in 1998 was only 3,663.21 metric tons while the consumptionrequirement was 20,017.13 metric tons. The provinces of Davao Oriental andDavao del Sur, and the cities of General Santos and Davao supplied the differenceof 16,353.92 metric tons.

The fishery potentials of the province rest on the development of fishponds oraqua farms. Little is expected from the marine areas of the shoreline

municipalities, as these are adversely affected by inappropriate fishing practicesand pollution due to inadequate waste disposal system. The brackish and freshwater fishponds as of 1998 reached to 563 hectares with 89.8526 hectares

production area.

The crop productivity in the province must confront the problems of massive

conversion of agricultural lands to other uses, floodings, soil erosion, inappropriatetechnologies, land use conflicts, and inadequate support facilities such asinfrastructures and marketing facilities. In like manner, poultry and fishingproduction must also address similar problems.

Agrarian Reform

The province has an aggregate land area of 466,693 hectares of which 153,097hectares are delineated as alienable and disposable, 1,381 hectares as NationalPark, and 313,596 hectares as forestland.

The clamor for agrarian reform three decades ago has subjected the alienable anddisposable areas of the province to land redistribution.

In the province, the identified working scope of the Comprehensive AgrarianReform Program (CARP) covered an area of 47,287 hectares. As of 2003, the

program distributed a total of 38,198.80 hectares through different modes ofacquisition, in which 33,782 individuals were registered as agrarian reformbeneficiaries (ARBs).

For CARP, the program has supported the construction of two Communal IrrigationSystems (CIS) at Cabidianan, Nabunturan and New Albay, Maragusan and aconsiderable length of farm-to-market-roads in all the ARC areas. Various technical

trainings were also undertaken to strengthen the capability of the beneficiaries.The program has also supported the economic activities of the agrarian reform

communities (ARCs) by providing access to loan credit amounting to PhP




10,842,195.00 from 1993 to 1994. This amount was released through theircooperative organizations.

There are 47 out of the 235 barangays covered by ARCs in the province as of2003. These 47 barangays compose the 14 ARCs across the 11 municipalities of

the province covering 9,972 beneficiaries.

B. Municipal2

Pantukan is one of the three coastal towns of Compostela Valley Province. It has atotal land area of 420.13 km2 or nine percent of the total area of the province.

Around 14,878 hectares or 35.41 percent of the municipal area is alienable anddisposable while 27,135 hectares or 64.59 percent of the area is forestland. Outthe total forestland, 19,110 hectares or 70.43 percent is classified as ProductionForest while 8,025 hectares or 29.57 percent as Protection Forest.

Pantukan is one of the oldest towns in Davao and the seat of one of the earlysettlements in the province before it became a part of the Compostela Valley

Province in 1988. Long before Davao was subdivided into several provinces, thetown was already an independent municipality through Executive Order No. 64issued by President Manuel L. Quezon on 13 November 1936. Originally, Pantukan

had 15 barangays. However, two of its progressive barangays, Mabini and Lupon,were later elevated as independent municipalities. At present, Pantukan iscomposed of 13 regular barangays, namely: Araibo, Bongabong, Bongbong,

Fuentes, Kingking (Poblacion), Las Arenas, Magnaga, Matiao, Napnapan, Tagugpo,

Tambongon, Tibagon, and Tagdangua.

The town is more accessible to Tagum, Capital of Davao and Mati, Capital ofDavao Oriental, than to its Provincial Capital of Nabunturan. The town proper isonly about 40 minutes drive to Tagum and about an hour drive to Mati.

The rich natural resources attracted migrants to settle in Pantukan. Majority ofthese migrants were of Visayan origin. This caused the increase in populationwhich also brought about the increase in economic activities.

The 1995 National Statistics Office (NSO) census survey showed the population ofPantukan at 56,780. Out of this population 18,127 (32%) live in the urban areawhile the majority or 38,653 (68%) live in the rural area. The municipality has11,540 households. During this period, Pantukan has the third largest populationamong the municipalities of Compostela Valley. Pantukan however, has the third

lowest population density among all municipalities of Compostela Valley at oneperson per hectare. Pantukan’s population is about 11 percent of the province,with an area contribution of 13 percent to Compostela Valley.

2 /Source:

Pantukan Comprehensive Development Master Plan Study.




Pantukan is a predominantly agricultural municipality. It is one of the keyproduction areas of Compostela Valley Province in rice, coconut, vegetables, and

banana. As of 1998, areas of the municipality planted to the following crops are asfollows: grains 1,326 hectares; fruits 750 hectares; industrial crops 750 hectares;vegetable 139 hectares; and rootcrops 35 hectares. During the same period, 211

hectares of land are irrigated. It is also the leading municipality in terms of fisheryproduction. In 1998, it was able to produce 1,314.78 metric tons of fish (35.89%of total production) with a total value of PhP 39,408,000.00. In particular, themunicipality ranks first in terms of fishpond or aqua inland production in the sameyear with a yield of 1,313.60 metric tons (36.55% of total production) and third inmarine with a yield of 1.18 metric tons (1.71% of total production). In terms ofnumber of fishponds, Pantukan has the biggest number in the province with 69covering 32.84 hectares. However, despite the high ranking in terms of fisheryproduction, there is still a supply deficit of 727.24 metric tons

For agrarian reform in the municipality, the identified working scope of the CARP is3,652.77 hectares. From 1986 to the 1999, the program has already distributed atotal of 3,453.75 hectares through different modes of acquisition benefiting 1,305

ARBs.

C. Barangay/Agrarian Reform Community3

Barangay Tagdangua, a coastal barangay, has a land area of 4,205.9015 hectares.This land area is divided into 1,678.7816 hectares for agriculture, 2,519.8768hectares forestland, 3.3731 hectares educational use, and 3.8700 hectares

government use. It is the fifth biggest barangay out of the 15 barangays inPantukan covering 7.44 percent of the total municipal area.

In terms of population size as of 1995, Tagdangua is the sixth largest barangayout of the 13 barangays of Pantukan. It is also the second fastest growingbarangay in terms of population size, with an annual average population growth

rate of 10.11 percent from 1990 to 1995. In terms of population density,Tagdangua ranks as the second most dense in the municipality with a populationdensity of 2.01 person per hectare, two times the population density of Pantukan.

As of 2003, the barangay has a population of 4,189 with 2,142 or 51 percentmales and 2,047 or 49 percent females.

Barangay Tagdangua is accessible by land through barangay roads. The mode oftransportation is habal-habal. It is seven kilometers away from the town poblacion.It has 10 puroks with distances ranging from 1.5 kilometers to 8.5 kilometers,from the barangay proper.

Tagdangua is an agricultural barangay. Around 40 percent of its total land area isdevoted to agriculture. Corn, coconut, and banana are the major crops cultivated.

Other crops planted in the area are vegetables and high value crops such as

3 /Source: Tagdangua Barangay Development Plan, 2001, and DAR -ARC Profile, 2003.




durian, lanzones, mango, rambutan, and coffee. Corn and vegetables and otherkinds of crops are planted in the upland areas while bananas and coconut aregrown in the lowland areas. Fishing and beach resorts are present in areas alongthe coast.

Being an ARC, Tagdangua became a center of development programs of thegovernment. It was chosen by the Department of Labor and Employment – Bureauof Rural Workers (DOLE-BRW) as a pilot area for its program “Self -ReliantOrganization for CARP.” It was also chosen as an expansion area for the AgrarianReform Communities Development Projects (ARCDP), a World Bank financedproject. As part of this program, piped water system was introduced in thecommunity which is presently being managed by the Barangay Off ice.

Several trainings have also been conducted in the ARC with the aim of improvingfarm productivity, enhancing livelihood activities, and strengthening existing

organizations (i.e. Integrated Pest Management by the Philippine Coconut Authority, Integrated Farming System by Local Government Unit-Municipal Agricultural Office, livelihood trainings like baking, meat processing, and banana

chips making by the Department of Trade and Industry, and institutionaldevelopment trainings by Department of Agrarian Reform, BRW, and Land Bank ofthe Philippines).

II.

Historical Background of Ownership of the Land4

Mr. David Jacobson, an American, put up his estate in Barangay Tagdangua in theearly 1920’s employing Visayan Sacadas. He acquired lands in the barangay bybefriending the datu of the area.

Initially, Mr. Jacobson was able to put up a 200-hectare coconut plantation. By the

late 1930’s, Mr. Jacobson’s estate apparently grew since he was able to leasearound 150 hectares to Japanese farmers to plant abaca. His share from the abacafarm was 10 percent of the farm proceeds.

By the time Mr. Jacobson passed away in 31 March 1970, his land had grown to

445.1867 hectares. Mr. Jacobson left no heirs. In his last will and testament, heleft the management of his estate to Brokenshire Memorial Hospital with a 60

percent share of the property, and gave the remaining 40 percent to 27 landlessfarmworkers who had worked for him for 15 years. The estate of Mr. Jacobsonwas then renamed as Tagdangua Plantation Company, Inc.

When the Department of Agrarian Reform (DAR) covered the Jacobson Estate forland distribution in 1991 under the Voluntary Offer to Sell (VOS) scheme, the

farmworkers were the ones operating the coconut plantation under a 70:30

4 /Source: Tagdangua Barangay Development Plan, August 2001.




sharing arrangement in their favor. The low price of coconut forced theTagdangua Plantation Company, Inc. to stop its operations.

When the Jacobson Estate was to be transferred, majority of the farmerworkersdecided to convert the coconut plantation to a banana plantation. However, there

were some who opposed the move thus, the farmerworkers were organized intothree groups, namely: the Agrarian Reform Beneficiaries Association (ARBA), theSmall Coconut Farmers CARP Beneficiaries (SCFCB), and the Tagdangua CARP

Beneficiaries Cooperative (TCBC). The ARBA and SCFCB decided that their landwould remain as coconut plantation while the bigger TCBC decided to convert theircoconut plantation into a banana plantation.

Concomitantly, DAR divided the mother Certificate of Land Ownership Award(CLOA) intended for ARBs of the former Jacobson Estate into three. The SCFCB(also known as petitioners) numbering around 13 individuals acquired 22 hectares

while the ARBA numbering around 35 individuals was able to acquire 46 hectares.What was left to the TCBC is around 377.1867 hectares.

When the mother CLOA had been distributed to the three different groups of ARBs, the TCBC, for lack of funds, decided to look for an investor and eventuallyentered into a joint venture agreement (JVA).

III.

The Tagdangua CARP Beneficiaries Cooperative (TCBC)and the Investor, the Mabini Industrial Tree Plantation

Incorporated (MITPI)

1. Tagdangua CARP Beneficiaries Cooperative (TCBC)

The Tagdangua CARP Beneficiaries Cooperative (TCBC) is the organization offarmers in the former Jacobson Estate who decided to convert their awarded landfrom a coconut plantation to a banana plantation. TCBC was organized in 1989and registered with the Cooperative Development Authority (CDA) in 17 June1992. The cooperative took over the management of 377.1867 hectares out of the445.1867-hectare area of the former Jacobson Estate when DAR distributed the

land to ARBs.

From its founding up to present, the TCBC has had 204 members. Its membership

is divided into two categories. The first category, composed of 76 members,includes those who were awarded three hectares each of agrarian reform land.The second category, composed of 128 members, includes those who wereawarded 1.15 hectares each of agrarian reform land. This grouping is the basis

used when subdividing the monetary benefits of the cooperative members fromthe TCBC and TAGDECOR.




While TCBC desired to put up a banana plantation, they lacked the capital to do soat that time. Thus, they decided to look for an investor and enter into a JVA. In

1992, their plan materialized when the cooperative successfully negotiated a JVAwith the Mabini Industrial Tree Plantation, Inc. (MITPI), a company headed by Mr.Josue Tesado. The TCBC and MITPI established TAGDECOR which became the

main income source of the cooperative’s members. The TCBC now represents itsmembers through the three seats it controls in the Board of Directors (BOD) of thecorporation.

To sustain its operation and to further help its members, the TCBC put up severalincome generating activities like lending (with five percent interest rate perannum), operation of a consumer store and bakery, and lease of a .25-hectarebeach and 1.7-hectare fishpond. In addition, the cooperative leased 10 hectares toa private individual for papaya production for a period of eight years. This 10 -

hectare land is part of the 360 hectares under lease with TAGDECOR for banana

plantation. The agreement started in 1999 and would last up to 2006. The leaserental is PhP5,000 per hectare annually for the first five years and would increaseto PhP5,500 for the last three years. Since this land is supposed to be used byTAGDECOR for banana plantation, the cooperative asked permission from themanagement of the joint venture corporation (JVC). Since TAGDECOR lackedcapital to develop the area at that time, it allowed TCBC to have it leased to aprivate individual.

The beach resort was initially operated by the TCBC and was later leased to aprivate individual when the huts in the resort were destroyed by strong winds. The

TCBC lost their investment and instead of infusing more capital, the officersdecided to just rent it out to an outsider at PhP4,000 annually. The TCBC alsoused to operate the fishpond and was able to harvest two times since it sta rted.

However, because of the difficulty in operating and managing the fishpond, theTCBC decided to rent it out at PhP25,000 per hectare annually.

These incomes are more than enough to sustain the operation of the TCBC. Infact, the cooperative has no outstanding loans from any banks or creditors. It isalso able to give dividend and patronage refund to its members. For 2003, theamount of dividend and patronage refund received by each ARB from thecooperative were PhP500 and PhP6,000, respectively.

2. Mabini Industrial Tree Plantation Incorporated (MITPI)5

The Mabini Industrial Tree Plantation, Inc. (MITPI) then LANTICOR, is a business

conglomeration that began as a logging firm. It started when Mr. Josue G. Tesadoand his business partners purchased LS Sarmiento Company, Inc., a logging firm,in December 1991. After taking control of the company, Mr. Tesado and his grouprenamed it as Landasan Timber Corporation (LANTICOR).

5 /Source: MITPI Group of Companies Prospectus.




When the company’s Timber License Agreement (TLA) expired on 30 June 1994,the BOD of the LANTICOR decided to venture into industrial tree plantation and

thus, changed their corporate name to its current name, Mabini Industrial TreePlantation, Inc.

Starting as a logging firm, MITPI has now become the main subsidiary of fivecompanies, namely, Chemwood Inc., Filipino Oil Corporation, Davao AsiaMarketing Corporation, Beagle Investigative and Detective Agency, Inc., and

Tagdangua Development Corporation.

IV.

The Establishment of Tagdangua DevelopmentCorporation (TAGDECOR)

In 1989, Pacific Agricultural Corporation (PASCOR), an agribusiness firm, rented 24hectares of land from the Tagdangua Plantation Company (former owner of the

land) for PhP 4,000.00 per hectare per annum which they used in putting up abanana nursery for the banana plantation they were planning to establish.

As mentioned in chapter two of this report, Tagdangua Plantation Company, Inc.was co-owned by the Brokenshire Memorial Hospital and the 27 farmworkers ofthe former landowner, Mr. David Jacobson. The hospital owned 60 percent of the

property while the 27 farmworkers owned 40 percent. The former landownerbequeathed his property to the new owners via stock sharing arrangement whenhe died in 1970 and handed over the management to Brokenshire Memorial

Hospital. The company owned a total area of 445.1867 hectares planted tococonut trees.

Since putting up the banana nursery, a certain Dr. Centena, one of the

incorporators of PASCOR, was convincing the farmworkers to convert the coconutplantation into a banana plantation. When PASCOR left the area, Dr. Centenaremained and continued to pursue the plan of establishing a banana plantation.

After the lands of the Tagdangua Plantation Company, Inc. were covered by CARPin 1991, most of the farmer-beneficiaries agreed to the proposal to convert the

coconut plantation into a banana plantation (other sources say the decision to shiftto planting banana came earlier). However, since there were farmworkers whoopposed the move to change the crop planted (members of ARBA and SCFCB),DAR divided the mother CLOA into three, with the TCBC having the most numberof farmer-beneficiaries (204 members) thus, getting the biggest part of the landsto work on.

Since the TCBC lacked capital, the members of the cooperative decided to enterinto a JVA. Initially, Marsman offered to lease their land. The TCBC rejected itpreferring JVA.




The current officers of the TCBC recalled that it was Dr. Centena who looked forthe possible investor. In addition, they recalled that Dr. Centena and the first set

of TCBC officers approached Mr. Josue Tesado, President of the then LANTICOR(renamed as Mabini Industrial Tree Plantation, Inc. in 1994), and proposed thatthe TCBC and LANTICOR enter into a JVA. But, based on the recollections of Mr.

Tesado, it was only the farmers who approached him during their initial meetingand Dr. Centena joined the negotiations only during the second or third meeting.The TCBC officers disclosed that they knew Mr. Tesado, a logger operating near

their area, even before they approached him for a possible JVA.

When the initial set of cooperative officers approached Mr. Tesado, the latter wasalready contemplating on shifting to agribusiness. Mr. Tesado saw logging as a

sunset industry at that time. It was by coincidence that the initial set of TCBCofficers approached him at the right time when he was planning a shift inbusiness. The officers proposed to have a JVA with Mr. Tesado to which the latter

acceded. According to Mr. Tesado, he agreed to such an arrangement because hewanted the farmers to earn decent income for themselves. He himself came froma humble beginnings and this was his way of helping them. He opined that in

lease rental arrangement, the ARBs lose control of their land without muchbenefit. In JVA, the farmers would earn income from the lease of their land, findwork since they are the priority in hiring, and in addition get a share of the profit.

The series of meetings that followed were about the mechanics and conditions ofthe JVC to be established. According to the current TCBC officers and Mr. Tesado,

no problems were encountered during the negotiations. Mr. Tesado narrated that

the negotiations lasted for a month but the current TCBC officers recounted thatthe negotiations took three months. In addition, the TCBC officers interviewedstated that the LBP and DAR were present during the negotiations and that thetwo agencies reviewed the finalized contract which Mr. Tesado refutes.

After all concerns were threshed out and approved by the General Assembly of

TCBC, the cooperative and LANTICOR created TAGDECOR. Dr. Centena was hiredas a consultant for two years but was eventually fired by Mr. Tesado. According tothe TCBC officers interviewed, Dr. Centena was fired because of the very highconsultation fee of PhP 50,000 per month he was charging TAGDECOR. Mr.Tesado confirmed this and added that the short temper of Dr. Centena whichcaused conflict in the plantation is also another factor why he was fired.

V. The Tagdangua Development Corporation (TAGDECOR):The Joint Venture Corporation

The Tagdangua Development Corporation (TAGDECOR) is a business entitycreated by the TCBC and MITPI when they entered into a JVA on 25 June 1992.Under the contract, TAGDECOR is 65 percent owned by MITPI and 35 percent

owned by TCBC. Both parties agreed to undertake production of Cavendish




bananas for export for a period of 20 years (the period was change and would bediscussed later).

TAGDECOR is managed by a Resident Manager who supervises the wholeoperation of the plantation. He makes sure that the day-to-day operations go

smoothly and the policies of the JVC are strictly implemented. In the field, 15 junior supervisors and three senior supervisors oversee the care and harvesting ofthe bananas. Each of the 18 supervisors has an assigned area. Once the harvest in

a particular area goes below the production target, the Resident Managerimmediately convenes a meeting with the supervisors and workers of the areaconcerned. In this way, the management can immediately pinpoint the problemand make the necessary action to improve production.

From its trying years i n t he beginning, TAGDECOR is now financially andorganizationally stable. It currently has no standing debt from any creditors and it

has good relationship with its workers. In fact, TAGDECOR is currently developingtwo expansion areas with a total area of 350 hectares. The banana plantation ofTAGDECOR is also ISO certified since 9 December 2003, a testament to the gains

made by the JVC and the hard work and cooperation given by the staff andworkers to the management.

1. Main Features of the Joint Venture Agreement

This section discusses the main features of the JVA entered into by and between

the TCBC and the LANTICOR.

The joint venture is an agribusiness arrangement whereby the ARBs of the formerJacobson’s estate through their organized cooperative, the TCBC and its business

partner, the LANTICOR, formed a joint venture corporation (JVC) to manage theproduction of banana plantation. Under DAR Administrative Order No. 2, Series of1999, the JVC, known as TAGDECOR, while co-owned by the ARBs and its

business partner, has a personality separate and distinct from its components.

Under this arrangement, TAGDECOR manages farm operations of banana

production with the TCBC maintaining land ownership while leasing the land to theformer. This company runs its business from field operation to marketing, andincurs all costs on its own. The marketing of their product is done through linkages

with DOLE Philippines.

A Memorandum of Agreement covers the JVA, the main features of its terms and

conditions are stipulated below:

a. Object of the Agreement

Ø A JVA was entered into by and between TCBC and LANTICOR on 25June 1992.




Ø The agreement covers the 360 hectares of agricultural land located inTagdangua, Pantukan, Compostela Valley (formerly part of Davao del

Norte), awarded by the DAR to TCBC on 27 November 1991 with apurchase price of PhP9,914,125 as valued by the Land Bank of thePhilippines (LBP).

Ø To achieve good administration management and control of any type ofbusiness activity and to enable the parties to institute safeguards on the

huge amount of investments, the parties agreed to form a joint venturecorporation (JVC).

Ø The land which is suitable to growing banana will be operated,

managed, developed or utilized by the JVC to be organized by bothparties for their mutual benefits.

Ø

The JVC shall convert, develop, operate, and administer the bananaplantation within the property of TCBC covering a portion of the 360hectares suitable to the growing of Cavendish Bananas. An initial area of

180 hectares shall be developed upon signing of the agreement whichmay later on be increased as the financial resources of the JVC wouldwarrant.

b. Key Features of the Contract

Ø The rate of lease rental over the 360 hectares operated as banana

plantation shall be PhP4,500.00 per hectare per year for the first fiveyears. The amount of lease rental would increase by PhP500.00 everyfive years.

Ø The lease rental for the first five years shall be shouldered by theLANTICOR and shall be paid to the TCBC who shall invest the same in

the JVC as its capital contribution.

Ø The lease rental covering the sixth year to the 20th year shall be

shouldered by the JVC and shall be paid to the TCBC at the beginning ofthe sixth and the beginning of every year thereafter.

Ø The capitalization needs of the JVC shall be PhP23,100,000. The TCBCwill provide PhP8,100,000 while the LANTICOR will providePhP15,000,000. The capitalization of the TCBC will come from the lease

rental payment for the first five years of the agreement.

Ø The start-up equity distribution by the parties is based on their capitalcontribution (35 percent for TCBC and 65 percent for LANTICOR).

However, at the JVC’s full expansion in the future, equity distributionmay equalize to 50-50 percent between the parties thus, the TCBC is




given the right to buy back from LANTICOR shares at the original costper share.

Ø The BOD of the JVC shall be composed of seven members, that is, f ourrepresentatives from LANTICOR and three from the TCBC.

Ø The labor requirements of the JVC shall be selected from the able-bodied beneficiaries and their close relatives. Hiring and firing of field

workers is to be done by officers of TCBC based on the policiesapproved by the Board of Directors of the new venture.

Ø The JVC will shoulder the additional PhP2,600,000 compensation for the

value of the land being claimed by the Tagdangua Plantation Company,Inc. (former owner of land transferred to beneficiaries) from TCBC Theamount to be paid by the JVC to Tagdangua Plantation Company, Inc.

will be:

§ Initial payment of PhP910,000 at the start of the project.

§ Remaining balance of PhP1,690,000 to be paid on installment for aperiod of four years.

Ø The TCBC will reimburse at no interest, whatever payments are made bythe JVC to Tagdangua Plantation Company, Inc.

2.

The Operationalization of the Joint Venture Agreement

The contract serves as a guide in the operations of the JVC. However, in thecourse of TAGDECOR’s operation, there are some changes in the agreement thatwere allowed but have not been formalized.

Based on the contract, TAGDECOR would lease 360 hectares of TCBC land for 20years and would give a five-year advance lease rental amounting to PhP8.1million. The advance lease rental covers the whole area even if only 180 hectares

was supposed to be initially developed. It was shouldered by the Mabini IndustrialTree Plantation Inc. (MITPI) and was paid in advance because it was thecounterpart capitalization of TCBC in TAGDECOR.

However, the original period of lease of 20 years was extended to 25 years andthe supposed period covered by the PhP8.1 million advance lease rental was

increased from five to seven years. According to TCBC officers, the period of leaseand the period covered by the advanced lease rental was extended because thewhole 360 hectares were not fully utilized for the banana plantation. In fact, out ofthe 180 hectares original area supposed to be initially developed, only 116

hectares were actually developed due to lack of capital. Moreover, TAGDECOR waslosing money during that time. The period of extension was only based on a verbal

agreement between MITPI and the then chairman of the TCBC. Since the




members of the cooperative were not consulted about the aforementioned verbalagreement, the then chairman of the TCBC was later impeached from his position.

Since not all lands supposed to be rented by TAGDECOR were fully utilized forbanana plantations, the unused lands were planted by ARBs to different crops for

their household or additional income. But as TAGDECOR expanded its plantedarea, farmers who occupied the lands to be covered by the subsequent expansionwere given PhP3,000 per hectare disturbance compensation by the TCBC. After

seven years of operation, only utilized areas of the 360 hectares is actually beingrented or paid for by TAGDECOR.

At present, the rate of capitalization of TAGDECOR is still the same as whenTAGDECOR was formed --- 65 percent for MITPI and 35 percent for TCBC.

According to the key informants interviewed, TCBC is now capable of buying backshares. However, members prefer getting their entire dividend yearly because of

household expenses and needs.

Succeeding payments for lease rental after the seven years, is coursed through

the TCBC. As an added indirect benefit, TAGDECOR allows ARBs to get land rentalin advance. Just like the lease rentals, the dividends of the ARBs are given byTAGDECOR through TCBC. But prior to giving the dividends of the ARBs, the TCBC

first deducts all loans of the ARBs from the cooperative, from TAGDECOR, andfrom Mr. Tesado.

At the start of operation, the number of members of the Board of Directors from

TCBC was only two while that of MITPI’s was three. In 1997, the number of BODmembers for both parties was increased to the number agreed upon under theMOA.

Most employees of TAGDECOR are ARBs or relatives of ARBs while outsiders makeup only a small percentage of the total workforce, most of whom are employed in

the TA GDECOR office in the plantation.

Hiring and firing of farmworkers or employees are supposed to be done by theTCBC officers. According to the TCBC officers interviewed, all applicants need arecommendation from the cooperative to be hired in TAGDECOR. In the firing offarmworkers, the company rules are strictly implemented to enforce discipline. Mr.

Tesado claims that if an organization has no discipline it will become weak, andthus, you cannot expect people to perform their responsibilities. However, the

offender is given the right to explain himself in writing and justify why he or she

should not be fired.

In both hiring and firing of farmworkers, the final approving officer is the ChiefExecutive Officer or Mr. Tesado. While the contract stipulates that hiring and firing

should be handled by the TCBC, Mr. Tesado has assumed this responsibilitybecause according to him, the ARBs do not know the over-all perspective in the

operation of the banana plantation especially those related to cost. Mr. Tesado




explained that politicking or “palakasan” among ARBs occurs in the field. If hewould not control the hiring, it is possible that the number of farmworkers andemployees in the plantation would swell. Mr. Tesado claims that it is important tocontrol expenses thus, he solely handles the financial aspect of the TAGDECOR.

But aside from the issues that emerged related to adherence to the contract,external issues arise like the accusation of residents living near the plantation thatTAGDECOR caused detrimental effects to fishes and illness among nearby

residents. However these accusations were never proven. To address theseaccusations, TAGDECOR submits itself to the evaluation of a multipartitemonitoring team led by DENR which is conducted every three months, and hasconsistently passed it. Likewise, to lessen hazardous effects of chemicals on the

residents near the plantation, TAGDECOR is shifting from air sprayer to mobiletank sprayer by January 2005.

VI. The Status of TAGDECOR

At present, the TAGDECOR can be considered as successful. From a losingsituation between 1992 to 1996, TAGDECOR has gained a net profit amounting toPhP50,000,000 in 2003.

In terms of production, from a harvest of almost less than 2,500 boxes per hectaremonthly, the banana plantation is able to harvest 3,800 boxes per hectare

monthly. This is more than the ideal harvest of 3,500 boxes per hectare monthly.

The improvement in the operation of the banana plantation of TAGDECOR is

commendable because it was even given an ISO Certification which was awardedon December 9, 2003. An ISO certification makes TAGDECOR an attractivebanana producer for the international market.

At present, 317 hectares is already being utilized out of the 360-hectare land areasupposed to be covered by the plantation based on the MOA. Out of the 317

hectares, 274 hectares is considered as productive land. The rest of the area or 43hectares are used for built-up areas (e.g. office, packing plant, canals, roads, etc.).

Aside from the 317-hectare banana plantation of TAGDECOR in Tagdangua, it

already has two expansion areas. The first, which is called TAGDECOR II, islocated in Barangay Kingking, Pantukan, Compostela Valley with an area of 250hectares. The second, which is called Lamanan Development Corporation where

TAGDECOR is a part-owner, is located in Sitio Lamanan, Kalinan, Davao City withan area of 100 hectares.

The land for TAGDECOR II is rented from the original coconut farmers in the areaat PhP18,000 per hectare annually. The original coconut farmers were given byTAGDECOR an advance payment for three years. They and their relatives are also

the priority in hiring. However, supervisors and office personnel came from TCBC.




According to the Resident Manager of TAGDECOR, more than 200 personnel were hired in TAGDECOR II.

At present around 200 hectares have been planted with banana in TAGDECOR II,70 hectares of which are already productive. According to Mr. Tesado, the coconut

farmers in the area usually earns around PhP14,000 per hectare annually. Thusthey would benefit from leasing their land to TAGDECOR because not only wouldtheir income from the land increase, they would also have employment.

The ownership and sharing of MITPI and TCBC in TAGDECOR II is also 65-35. Thecapitalization for TAGDECOR II was patterned after the original TAGDECOR in Bgy.Tagdangua since the capital used for establishing TAGDECOR II is derived fromthe latter.

In the Lamanan Development Corporation, TAGDECOR is just a minority part-

owner (40 percent according to Mr. Tesado). At present, only about 35 hectareshave been planted, five hectares of which are already productive.

According to Mr. Tesado and as concurred by the TCBC officers, MITPI could haveestablished the additional plantations by itself, but because Mr. Tesado would liketo help the ARBs of TCBC, he decided to include them through TAGDECOR.

These expansions only show that TAGDECOR is financially stable. In fact,according to the key informants interviewed, TAGDECOR is indeed self -sustaining

and has no debt.

TAGDECOR even assists in community projects of the municipal government ofPantukan like the medical mission conducted once a year where the JVC provides

meals and medicine. In addition, TAGDECOR also donates drums to the wastedisposal program of the municipal government.

VII.

Problems Encountered in the Operation of the Joint Venture Agreement

While TAGDECOR can now be considered a success, it is not without its problemsespecially during the initial years. These problems were:

1. Additional Claims of Brokenshire Memorial Hospital

A few months after the 377.1867 hectares of the former Jacobson Estate wasawarded to TCBC, the Brokenshire Memorial Hospital demanded an additional

valuation of PhP6,000 per hectare from the ARBs on top of the assessed value ofthe LBP. To be able to continue TCBC’s planned joint venture, the cooperativeagreed to pay.




The additional payment to Tagdangua Plantation Co. Inc. was later included in theMemorandum of Agreement entered into by TCBC and MITPI. Based on the

contract, TAGDECOR will initially shoulder the additional payment but TCBC willreimburse it with no interest. The additional payment was to be paid on astaggered basis.

However, only the initial payment of PhP910,000 was paid. The TCBC filed a casein court to contest the additional claims made by Tagdangua Plantation Co. Inc.

According to the lawyer of TCBC, the cooperative was only mandated to pay theassessed value of the land made by LBP and thus, should not pay the former anyadditional amount.

Based on the recollections of the current TCBC officers, TAGDECOR won the case.But according to Mr. Tesado, the case dragged on until the Tagdangua PlantationCo. Inc. lost interest in pursuing its claims. At present, the TCBC had already paid

the initial payment made by TAGDECOR to Tagdangua Plantation Co. Inc.

2. TAGDECOR Losing Money

Mr. Tesado recalled that during the early stages of TAGDECOR’s operation, thecorporation was losing money because of the attitude of the ARBs towards their

work. They are used to cultivating coconut which is not labor-intensive, thus, theycannot provide the kind of work required for the banana plantation. Moreover,some ARB-farmworkers, because they are part-owners, refused to follow

TAGDECOR’s policies or became hard headed. They could not be controlled or

made to work harder since they feel they are the owners, thus, should not beordered around.

According to the TCBC officers, the reasons why TAGDECOR was previously losingmoney include mismanagement, lack of technical know-how, and because thefarmers were not used to the work demanded by a banana plantation.

According to the Resident Manager on the other hand, the reasons for previousfinancial loses were the attitude of the ARB-farmworkers resulting to the low

production, leniency of management, and high rejection rate of farm produce. Thelast reason was the former buyer of TAGDECOR, Davao Fruits Corporation (DFC),is a small buyer. Small buyers have a limited market and require higher

specifications. Therefore, the chance for rejection of the produce is also higher.

In terms of production, during the losing stage, harvest of bananas almost did not

reach the 2,500 boxes per hectare monthly mark. The ideal is 3,500 boxes perhectare monthly to make the venture profitable.

3. Labor problem

The key informants also cited that the common reason why TAGDECOR was losing

money was the attitude of farmers towards their work. Both the manager and




TCBC officers confirmed the account given by Mr. Tesado regarding the problemwith labor.

In 1994, Mr. Tesado decided to retrench employees. This resulted to theretrenchment of 30 personnel which included an officer of the TCBC. Mr. Tesado

claimed that the BOD of TCBC was informed regarding his decision, his claim ofwhich was confirmed by the current officers of the TCBC.

Based on the interview with Mr. Tesado, he decided to retrench farmworkersbecause he saw the need to cut on cost. Rather than let the JVC close and let allthe ARBs and farmworkers suffer, he decided to cut labor in areas where reductioncould be made. Retrenched employees who are members of TCBC remained as

such and are entitled to all benefits given to a member. He clarified that hecleared this retrenchment with the Department of Labor and Employment (DOLE)and informed the TCBC and farmworkers of his decision.

VIII. Factors that Contributed to the Successful Establishmentof TAGDECOR

Both TCBC officers and Mr. Tesado implied that the formation or establishment ofTAGDECOR was partly a product of good fortune. At the time when TCBC waslooking for a partner-investor in the banana plantation they were planning to

establish, Mr. Tesado was also planning a shift in business, from logging toagribusiness.

During its initial years, however, TAGDECOR was losing money. Production waslow because of problems relating to the attitude of farmers. Since it was losingmoney, except for the salaries for farmworkers, it was unable to provide themonetary benefits it was supposed to give the ARBs. The ARBs therefore, startedcomplaining and questioned the transparency of the corporation’s finances.Because of these problems Mr. Tesado almost gave up on TAGDECOR and at onetime, came near to selling his shares. He already talked to a possible buyer ofshares but they were not able to come to terms.

As recalled by Mr. Tesado, TAGDECOR started to earn profits in 1996 and hasbeen earning since then. The factors that turned the situation and eventually ledto the success of TAGDECOR are:

1. Transparency, Hard Work, and Cooperation

During TAGDECOR’s trying years, Mr. Tesado frequently visited the farm to see the

operations of the banana plantation and to talk to the ARBs. He tried to ingrain inthe minds of ARB-farmworkers that they would not earn profit unless they wouldwork hard. He told them that unlike growing coconuts, bananas require more

attention. He also demonstrated leadership by example. Whenever Mr. Tesado




visits the plantation, he uses his personal vehicle and pays for his gasoline. Mr.Tesado also gave up his salary as president of the TAGDECOR. With these

gestures and through the constant encouragement and explanation given by Mr.Tesado to the ARBs, the latter became more cooperative and began to workharder. At present, Mr. Tesado visits TAGDECOR only around four to five times per

year, usually during special occasions like fiestas. However, the ARBs can readilyapproach him in his office in Davao City which is attested by the current TCBCofficers and TAGDECOR Resident Manager.

To extinguish the doubts of the ARBs on the finances of the JVC on the otherhand, all expenses and revenues of TAGDECOR are published and the TCBC BODfurnished with copies. Quarterly income statements (untaxed) are also given to

TCBC. In addition, in all disbursements, the chairman of the TCBC was made a co-signatory. Moreover, while the accountant of TAGDECOR is not a member of TCBCor related to any of its members, the office personnel of TAGDECOR are all

children of ARBs.

2. Good Management

The appointment of the current manager is also a factor in the success of the JVC.The first manager was lenient and was unable to control or discipline the ARB -

farmworkers. The current manager on the other hand is firm in implementingTAGDECOR’s policies but at the same time can relate well (magaling makisama) tothe workers. These characteristics of the present manager earned him the respect

of the ARB-farmworkers.

3. Financial Support and Higher Exchange Rate

Another important factor that contributed to the success of TAGDECOR is thefinancial support given by MITPI and the increase in value of dollars vis-à-visPhilippine peso. Throughout the financial difficulties experienced by TAGDECOR,

MITPI still infused capital despite losing money. This enabled TAGDECOR tocontinue operating until it was able to recover. When the exchange rate of thedollar to peso increased, it was then that the business boomed since the payment

of DOLE Philippines to TAGDECOR is fixed and in US dollars.

IX. Socio-Economic Benefits Derived By The ARBs from the Agribusiness V enture Arrangements

The key informants recalled that Tagdangua was a very poor barangay beforeTAGDECOR was established. There were no television sets in their area and the

common mode of transportation were bicycles. These key informants all agreedthat the establishment of TAGDECOR brought many benefits that improved thelives of ARBs. These benefits are very evident as may be seen in the improvement




of the houses in the barangay and the acquisition of valuable assets likemotorcycles and television sets, to name a few, by the barangay residents.

These changes are the effects of the economic opportunity brought byTAGDECOR. It provided the ARBs and their children work. The Resident Manager

receives a monthly basic salary of PhP20,000 while the junior supervisors andsenior supervisors receive PhP6,000 and PhP7,800, respectively. The regular andcontractual workers on the other hand, are paid in a per day basis. Regular

workers are paid PhP183 per day while contractual workers are paid PhP137 perday. Benefits like availment of Social Security System (SSS), Philippine HealthInsurance (PhilHealth), and Home Development Mutual Fund (Pag-IBIG) areprovided by the JVC to all its employees. On top of this, the JVC has an incentive

scheme that enables the employees to get additional benefits whenever theproduction target is met. The current production target is 90,000 boxes of bananaper month. If this is met, an additional PhP1,000 and one sack of rice are given.

The supervisors (junior and senior) and the Resident Manager on the other hand,are given an additional PhP2,000 and PhP3, 500, respectively, and one sack of riceeach.

Notably, they get a share of the profit in the form of yearly dividend, on top of theannual land lease rental. For 2003, an ARB who owns three hectares received the

amount of about PhP136,000 and for those who own 1.15 hectares, aboutPhP50,000 was given.

As a result of these benefits, more children in the barangay are sent to school. The

key informants in the barangay interviewed even boast of the increase in numberof college graduates in their area. In addition, farmworkers are also allowed toobtain salary loans through TAGDECOR’s provident fund. The range of amount

that can be borrowed is from PhP5,000 to PhP10,000 with a fixed interest rate of five percent.

Other benefits derived by the ARBs from TAGDECOR are assistance in settling theadditional claim of Brokenshire Memorial Hospital, assistance in the payment ofthe land amortization in the LBP, electricity in the barangay, and improved road

conditions (dirt road). Indirectly, the ARBs also benefit from the JVC due to theassistance given by the investor to TCBC, like the operation of the canteen andseed money for the lending operation of the cooperative (with five percent interest

rate per annum). Mr. Tesado himself gives personal credit assistance to ARBs atfive percent interest rate annually. Mr. Tesado gives a maximum credit limit ofPhP100,000 for those who own three hectares and a maximum credit limit of

PhP40,000 for those who own 1.15 hectares. Prior to the lending operation of theTCBC and the credit provided by Mr. Tesado, ARBs got loans from other sources at10 percent interest rate annually. It was this high interest rate that pushed Mr.Tesado to give seed money for the lending operation of TCBC and why he gives

credit to ARBs. Lately, the TCBC officers have also been consulting Mr. Tesadoregarding the business plans of their cooperative.




From these benefits, the development of the community and improvement in thequality of lif e of the ARBs has become evident. Based on the interview with the

key informants and selected ARBs, Tagdangua has become better off compared toits situation prior to the agrarian reform coverage of the area and theestablishment of TAGDECOR

X.

Development of the Capability of ARBs

Ownership of land by ARBs brings with it a social responsibility to make the landproductive and use the land in a sustainable way. Providing social preparation to

ARBs is extremely imperative to train the former landless farmers or farmworkersin assuming their new role as landowners. And since farming is a business, theylikewise need to be prepared to become competent rural entrepreneurs. The task

is not easy since ARBs in general lack proper educational training and have a

mindset of dependency shaped through many years of being tenants orfarmworkers.

An equally important factor for ARBs to meet their social responsibility as newowners of land is capital to invest in the land. The availability or lack of it is a bigfactor that can spell the success or failure of agrarian reform.

While the award of land may encourage ARBs to work harder to make their landmore productive and increase their income, the two aforecited factors may hinder

them from exhausting the full potential of their land and their labor. Thus, despite

the transfer of land, it would be presumptuous to assume that ARBs could freethemselves from the so-called bondage of poverty.

Theoretically, AVAs like JVAs may help address the two factors cited above. Theinvestor may help provide the capital and technology necessary for the agricultural

enterprise while at the same time providing the entrepreneurial skills necessary torun the business successfully. The ARBs on the other hand, may provide the landand labor, and depending on the type of AVA, part of the capital as well. In this

kind of arrangement, the ARBs learn how to deal with an investor and how toenter into a business relationship.

In the case of TCBC however, while the JVA served as a means for the ARBs to

have gained access to capital and technology, the capability of ARBs to conductbusiness is only minimally addressed. This is despite the 12-year experience ofTCBC in dealing with MITPI as well as the seminars conducted by TAGDECOR on

managerial skills.

Decisions regarding administrative, financial, and operational aspects of the JVC,

including the marketing aspect, are largely made by MITPI, particularly Mr.Tesado. The ARBs’ participation in running the JVC on the other hand, is generallylimited to the operation of the banana plantation itself as workers. Thus, based on

TCBC’s 12-year experience of working in the plantation and the seminars provided




by DOLE Philippines, TAGDECOR’s buyer, the ARBs became technically capable ofrunning the operation of the plantation including the packing plant. What the ARBs

failed to develop is their capability in the management, financial, and marketingaspects of the agribusiness venture.

Specifically, based on the perception of the TCBC officers and selected ARBs, theylack the capability to manage the business affairs of the banana plantation.However, they are confident that they have enough technical experience to runthe daily operation in the banana plantation including the postharvest activitiesand packing of the harvest for shipment abroad. The future is bright according tothe TCBC officers. They are hopeful that the children of ARBs who graduated fromcollege would be able to takeover and run the entire affairs of the banana

plantation --- from the field to the boardroom --- when their contract with MITPIexpires.

The manager also shares this observation of the TCBC officers. According to him,the ARBs are capable of running the banana plantation itself, especially now thatthe ARBs’ children are educated. However, they lack the experience in the

business aspect, especially in marketing.

Mr. Tesado on the other hand, while agreeing with the perception of the ARBs,offers a broader perspective with regard to the capability of ARBs to takeoverTAGDECOR. Mr. Tesado concurred with the perception of the TCBC officers thatthe ARBs can run the banana plantation itself. However, he cited two points that

may hinder a successful takeover of TAGDECOR by the ARBs. The first point is the

lack of capability of the ARBs to negotiate with a buyer to get a goodarrangement. The Development Facilitator (DF) for the area made the same claim,stating that the ARBs are not aggressive enough to be able to negotiate for a good

business arrangement. The second point cited by Mr. Tesado was the politickingby ARBs among themselves. According to Mr. Tesado, the Filipino culture of

“palakasan” and “pakikisama” might come into play in the hiring of employees or

farmworkers which might be detrimental to the company. Mr. Tesado pointed outthat handling of any business should be done professionally.

XI.

Perception of ARBs and Investors in Entering Into an Agribusiness V enture Arrangement

The key informants from TCBC and the selected ARBs all view the formation of theJVC as something beneficial to them. It provided them work, lease rental for theland, and share of the profit. The ARBs see the establishment of the JVC as anopportunity that helped improve their community.

For Mr. Tesado, on the other hand, the JVC was a welcome opportunity because atthe time that the previous TCBC officers approached him for a possible joint

venture agreement (JVA), he was already thinking of shifting from logging to




agribusiness. In addition, he agreed to enter into a JVA to help the ARBs becausehe himself was once poor. Unlike lease rental, JVA gives the ARBs a share of the

profit and makes them priority in hiring farmworkers for the JVC that will beformed.

Thus, both parties see the JVA as something mutually beneficial. This indicatesthat indeed, the JVA in Tagdangua is a success.

XII.

Future Plans for TAGDECOR

Mr. Tesado aims to develop a total of 1,000 hectares of banana plantation. Hesees that the bigger the plantation, the better leverage in negotiating for theselling price of banana. He aims to reach this goal in three years. But with regardto the continuation of MITPI’s JVA with TCBC, he leaves everything to the decision

of the ARBs. But in the many instances that he was able to talk to the ARBs, hekept on encouraging them to send their children to school so that when they

decide to take over TAGDECOR, their children can manage the business.

For the ARBs, they are already considering taking over TAGDECOR once their

contract with MITPI expires. However, the TCBC officers recognize that at present,while they can operate the plantation, they cannot handle the business aspect ofthe banana plantation especially the financial and marketing aspect. While they

have children who are college graduates, the officers admitted that their childrenlack the experience of managing the plantation. They foresee that since there still

a long way to go before their contract with MITPI expires, they and their childrenhave still time to prepare themselves to eventually takeover TAGDECOR if theyfinally decide to do so.

XIII. Lessons Learned

1. Social preparation of the ARBs should be undertaken prior to the awardingof lands to train them in assuming their new role as landowners. Sincefarming is a business, they need to be prepared to become competent rural

entrepreneurs. The ARBs should be oriented on the responsibilities that gowith the ownership of the land which include: effectively managing theirresources, organizing and working as a group, and the proper attitude

towards work.

2. Farmers’ organizations such as cooperatives are mechanisms forempowering ARBs. They provide the means for ARBs to work as a group toimprove their communities and the quality of their lives. As a group, ARBs

have more bargaining power and leverage when dealing with investors. Forthis to happen, the ARBs should be trained on entrepreneurial management




for cooperatives or farmer organizations to become effective means ofempowerment.

3. A relatively cheaper and viable source of credit for farmers, despite

numerous credit programs of the government, still remains to be achieved.

Existing credit sources which charge higher interest rates over formalsources, make it more difficult for the ARBs to overcome poverty in the

rural areas.

4. ARBs engaged in AVAs need other forms of livelihood to supplement theirincome and enable them to stop incurring loans and promote savingsneeded to alleviate poverty in the community.

XIV. Implications and Recommendations

1. From a business point of view, TAGDECOR as an agribusiness venture , canbe considered a success. From the point of view of the CARP, while

TAGDECOR has helped the ARBs improve their quality of life, a lot is stillneeded to be done to be able to say that they are finally free from the so-called “bondage of poverty.” The claims of key informants that many ARBsobtain loans , which sometimes even exceed the amount that they would be

getting from the JVA as share of the profit, indicate the need for othermeans of livelihood for the ARBs other than the JVA. The ARBs through theTCBC have to venture into other income generating activities.

Coming up with livelihood programs that would enable ARBs to stopincurring debts and help promote savings are needed to alleviate poverty inthe community. For the ARBs of TCBC, lack of money for daily needs

compels them to obtain loans even if the interest rate is five percent peryear and sometimes higher. This prevents the ARBs from achieving thecapacity to buy back shares from MITPI and increase their share fromTAGDECOR’s profit and increase their household income.

2. After 12 years of partnership with MITPI, it is apparent that the ARBs havenot yet acquired sufficient entrepreneurial capabilities. While they are

knowledgeable and capable in the technical aspects of banana production, they are not yet prepared in so far as the business aspect of the JV A isconcerned. Since the JV A has 13 more years to operate, the TCBC has morethan enough time to prepare for the eventual take over if its members

would choose not to renew their contract with MITPI. Otherwise, it wouldbe better for TCBC to renew their partnership with MITPI and bargain forimproved terms.

3. The readiness of TCBC to take-over TAGDECOR at the present can be easily

gauged. Based on its performance in handling its past business ventures,

this does not bode well. Even the yearly election being conducted by TCBC



can be a cause of problems once the ARBs decide to take over TAGDECOR. At present, the annual changes of officers who represent the cooperative in

the Board of TCBC may already be a cause for concern. The ARBs must firstimprove the system of running their cooperative before even thinking oftaking over TAGDECOR.

4. The establishment of two expansion areas speaks well for TAGDECOR. Itshows that businesswise, the JVA is really performing well. However, based

on the interview of key informants, there is no MOA regarding the twoexpansion areas and all pertinent agreements were done verbally. Thiscould be a cause of problems in the future, especially if TCBC decides not torenew its partnership with MITPI. The problem with this set-up is how to

divide between TCBC (the ARBs’ cooperative) and MITPI (the investor) , theproperties and capitalization of TAGDECOR in the two expansion areas afterthe duration of the JVA expires. Therefore, this issue should be formalized

as early as possible by TCBC and MITPI to avoid conflict in the future.

5. The extension of the period covered by the initial land lease rental paymentamounting to PhP8.1 million from five years to seven years and the

extension of the contract of TCBC from 20 years to 25 years, whichaccording to key informants from the ARBs are not covered by any legaldocument, can be a cause of problems in the future. Legal issues maymerge and may affect the operation of TAGDECOR particularly when the

20th year of operation of TAGDECOR is reached. TCBC and MITPI shouldaddress these issues at the soonest.

6.

The DAR should provide technical assistance to ARBs when they arenegotiating with investors to ensure that the terms are fair to both theinvestors and the ARBs. Once a contract is signed between the ARBs and

the investor, DAR should regularly monitor its implementation to protect thewelfare of ARBs.

AVA JVA Compostela Valley

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