Doing Agricultural Business in the Philippines: Know Your Options
To engage in agriculture in the Philippines requires doing legal due diligence. In the past, it was as simple as purchasing agricultural land. Nowadays, one has to be mindful of the rights of tenants and ownership of the farm real estate.
The Department of Agrarian Reform (DAR) regulates the ownership and occupancy of agricultural land and it is only a matter of doing due diligence that a prospective agribusiness entrepreneur should know and understand these regulations.
The Comprehensive Agrarian Reform Program (CARP) with its statutory basis in R.A. No. 6657, as amended by R.A. No. 9700, has for its purpose the redistribution of the ownership of farmland from their original owners to the tenants or individuals who till or work on the land.
The implementation of this decades long program survives the expiration of the law on June 30, 2014. This means the DAR can continue to expropriate lands and redistribute them to agrarian reform beneficiaries (ARBs) as long as the notice of coverage was issued before June 30, 2014.
ARBs, in contrast to mere tenants over agricultural land, are holders of land titles known as certificate of land ownership award (CLOA).
Options to Doing Agricultural Business in the Philippines
Future agribusiness entrepreneurs will have to either be ARBs themselves or partner or contract with ARBs in some capacity to be able to engage in the farming business. Notably, the legal vehicles to do business with ARBs have been provided for in DAR Administrative Order No. 1998-09.
The various types of Agribusiness Venture Agreements (AVAs) are the following:
Joint venture agreement
The ARB and the investor create a joint venture where the ARB contributes use of the land while the investor contributes capital assets, facilities and technology to boost the production of crops. The investor may also take part in managing the operations of the farm according to the terms of the joint venture agreement.
The ARB leases the use of the land to individuals or a company who can then operate an agribusiness on the property. Lease agreements with ARBs are valid for ten (10) years and may be extended upon mutual agreement.
The ARBs agree to produce crops which will be bought by the other contracting party at pre-arranged terms (e.g. price, volume, standard quality).
The ARBs hire contractors to assist in farm operations for a fixed fee or commission.
The ARBs contract with a party who can find new buyers and markets for the agricultural produce. The counterparty will be paid commission on actual sales.
Build Operate Transfer (BOT)
For large projects, the ARBs can enter into agreements for the construction, rehabilitation or maintenance of capital assets, facilities and infrastructure. The ownership of the same will be turned over to the ARBs after a maximum initial period of twenty-five (25) years, subject to extension.
In spite of the expiration of the agrarian law, the DAR still retains certain functions such as its adjudicatory function. Thus, Section 30 (g) of DAR Administrative Order 9-1998 considers disputes relating to the interpretation and enforcement of AVAs as “agrarian disputes” and are hence under the jurisdiction of the DAR and not the civil courts.
As discussed, there is no need to purchase farmland in order to do agribusiness in the Philippines.
The rules on AVAs allow for collaboration between the owners (ARBs) and agribusiness entrepreneurs on either a long term or short term basis with much flexibility.
About Atty. Kenneth
Atty. Kenneth C. Varona is a lawyer with experience in civil and criminal litigation, contracts, immigration law, and intellectual property law. He worked in Metro Manila for three years before starting his own firm Varona Law in 2020. He also writes at Economerienda, a blog offering snackable insights on personal finance, business and life.