In 2019, the Philippines had a rice production deficit of more than 1.4 million metric tons. Despite this, farmlands are shrinking in the country, bringing threats of food insecurity for its growing rice-eating population. 

Rice is sacred in the Philippines, where it’s a staple in every meal. On an average, a Filipino consumes almost 119 kilograms of rice annually – that is roughly 12.9 million metric tons for a total of 108.66 million people per year.

But in the last two decades, thousands of hectares of agricultural land have been converted to residential areas or commercial developments, stifling the production of palay (rice), from which rice grains are produced. In 2019, the Philippines had a rice production deficit of more than 1.4 million metric tons. In a country with a growing rice-eating population, this is a cause for alarm.

Shrinking rice basket

Farmland conversion occurs largely in the country’s rice basket of Central Luzon; most notably, in the province of Bulacan, which lies just north of the Philippines’ populous and congested National Capital Region (NCR), Metro Manila. Bulacan’s proximity to NCR has caught the eyes of real estate developers looking to build more affordable housing just outside Metro Manila. From 2003 to 2015, the province shed 19,000 hectares of agricultural lands through land conversion. In the last five years, there was an almost five percent decline in farmlands harvested for palay, and a one percent decline in the volume of palay produced in the province.

Lapses in regulations

Skewed government policies, lack of support for agricultural workers, and weak implementation of laws by the respective political actors have led to continued largescale land conversion, to the detriment of farmers.

Land conversion processes have become easier in the last two years. In 2019, the Department of Agrarian Reform itself issued Administrative Orders for “Streamlining the Processing of Applications for Land Use Conversion” (AO 1 series of 2019) and the “Creation of a Collegial Body on Land Use Conversion and Exemption/ Exclusion from CARP Coverage” (AO 6 series of 2019), making it easier for large developers to convert farmlands. In the same year, the Philippines also passed the controversial Rice Tariffication Law, which lifted limits on rice imports, pulled farmgate prices for rice down and caused farmers to sell their lands to developers taking advantage of their situation.

There are also other tactics to speed up land conversion. In some cases, there are reports of turning off irrigation pipes and pouring massive amounts of soil on farmland to pass it off as “idle.” This makes it easier for the National Irrigation Administration (NIA) to issue a certificate of non-irrigation required to secure land conversion.

Lack of funding in agriculture

The Bangko Sentral ng Pilipinas (BSP) can play a critical role in ensuring the implementation of financial policies and mechanisms that better enable the inclusion and protection of farmers and communities dependent on agricultural lands.

Much of the land conversion is precipitated by the lack of investment in the agriculture sector—an essential but largely neglected industry in the Philippines. Even when there are laws to promote funding for it, in practice there is little follow through. In a 2019 article published on the Philippine Star, a BSP monetary board member himself shared banks would rather pay fines than lend to farmers, whom they view as credit risks.

The Agri-Agra law requires banks to allocate 25 percent of their total loan portfolio to agrarian reform credit (10 percent) and agricultural credit (15 percent). However, in 2018, only 0.79 percent of universal and commercial banks complied with the 10 percent required lending to the agrarian reform sector, and 12.95 percent with the 15 percent lending to the agricultural sector. This, despite the ratio of non-performing agricultural loans dropping to less than three percent in 2018 — only slightly higher than the banking industry’s 1.83 to 1.87 percent ratio. Meanwhile, investments in real estate balloon despite questionable practices employed by some developers.

Less farmland brings greater risks

The banking sector has yet to recognize that unsustainable land conversion and food insecurity present key business risks for banks and financial institutions. Despite claims of the Philippines being an “agricultural country,” the government and regulators have done little to protect farmers and the country’s most important staple crop. Instead, they do the opposite, favoring developers through policies and practices that make it easier for them to claim their stake on these lands. One farmer had strong words for what’s happening in his town: “legal land grabbing,” he says. With the right amount of pressure to secure necessary forms and approvals, these developers can just apply for land conversion at the expense of farming communities.

Policy action now

When big businesses’ and farmers’ interests collide, it is almost always marginalized farmers who lose against deep pocketed-developers. Although affordable, accessible housing continues to be important, ignoring farmers’ rights in favor of real estate giants will bring heightened risks in the long term. Climate change and the COVID-19 pandemic have shown us first-hand how dependence on rice imports can put the Philippines in a tight spot during times of crisis.

With the Philippines’ food security under threat, the government must step up and balance the need for housing and agricultural land. Closing the housing gap should not come at the expense of agricultural workers. On Legislative and Executive ends, an enabling law should be passed to prohibit conversion of rice lands into residential, commercial, and industrial developments. Congress should also pass the proposed National Land Use Act with a clear provision stating irrigated, irrigable, and rainfed prime agricultural lands be protected in perpetuity to ensure food security.

Meanwhile, financial regulators such as the Bangko Sentral ng Pilipinas should ensure stricter implementation of policies that enable the protection of rights of marginalized farmers, rather than business-focused policies that have increased the depth of inequality in this sector.

The frameworks for these already exist: the Security and Exchange Commission Memo Circular 4 of 2019 requires publicly listed companies to submit an annual sustainability report in line with global standards. In line with this, SEC must monitor reports from companies, including banks and other financial institutions, enabling companies supporting land conversion efforts.

The BSP must also require strict adherence to sustainability reports, enforce stricter implementation of the Agri-Agra Law, and recommend reforms that can facilitate better credit support for farmers. In doing so, financial institutions can expressly recognize that unsustainable land conversion and erosion of food security present key business risks for banks and financial institutions as well.

Read the full report here.