EXECUTIVE ORDER NO. 151
EXECUTIVE ORDER NO. 151 -
ESTABLISHING THE FARMERS TRUST DEVELOPMENT PROGRAM AND PROVIDING
INSTITUTIONAL REFORMS AND FUND MECHANISMS FOR MOBILIZING LONG TERM
PRIVATE SECTOR CAPITAL FOR RURAL DEVELOPMENT
WHEREAS,
the government’s priority goals of poverty eradication, food security,
global competitiveness and empowerment of the farmer require the
creation of new institutional structures and mechanisms that can expand
medium and long term private sector investments in agriculture;
WHEREAS, the achievement of these goals requires the voluntary
consolidation of small farm operations into medium and large scale
integrated enterprises that can access long term capital for critical
modernization requirements needed to attain global competitiveness;
WHEREAS, the provision of incentives requires an institutional shift
from direct subsidies and inputs towards risk-aversion mechanisms such
as insurance, securities and guaranty schemes that enable
diversification and formation of medium and large scale integrated farm
enterprises;
WHEREAS, the Department of Agrarian Reform (DAR) is tasked to directly
assist farmers, who are society’s most impoverished, vulnerable and
economically non-competitive sector, by undertaking innovative schemes
to improve farm productivity and income;
WHEREAS, to enable the formation of integrated farm enterprises, the
Department of Finance (DOF) must take the lead in catalyzing
investments and developing long term capital market for agriculture
through appropriate financial support, incentives and fund mechanism,
including tapping of credits allocated to the agriculture and agrarian
sectors under the Agri-Agra law;
WHEREAS, the Quedan and Rural Credit Guarantee Corporation (Quedancor)
is mandated under RA 7393 (Quedancor Charter) to provide credit,
investment and guaranty mechanisms to assist small farmers, producers
and fisherfolk, and is also mandated under RA 8435 (Agriculture and
Fisheries Modernization Act of 1997) to consolidate and manage the
guaranty funds of the government and to establish a centralized
government capability for agricultural guaranty.
NOW, THEREFORE, I, JOSEPH EJERCITO ESTRADA, President of the Republic
of the Philippines by virtue of the authority vested in me by law, do
hereby order:
Section 1. Establishment of the Farmers Trust
Development Program. — The Farmers Trust Development Program,
hereinafter referred to as the Program, is hereby established. The
Program shall promote, authorize and support the voluntary
consolidation of small scale agricultural landholdings into medium and
large scale farm enterprises through a usufruct trust arrangement with
a Service Consortium, to be chosen by the participating farmers and
approved by the DAR.
Sec. 2. Components. — The Program shall have the
following components:
a.
Farmers Trust. Individual agricultural landholdings in suitable
commodity belt areas, can be made available to a Farmers Trust
Enterprise through the conveyance of the usufructuary rights to the
Trust, by the respective owners or rights holders, who shall retain
ownership and title to the properties, and share in the income of the
enterprise under an equitable arrangement.
The farm owners may opt to work
for the enterprise with priority to employment. For ease of
organization, the farmers may be represented by a properly authorized
cooperative, federation or farmer association.
b. Service
Consortium. The Service Consortium shall undertake the organization and
development of the Trust Enterprise and assist in securing capital
resources through the system of project securitization and issuance of
project participation certificates. The Consortium, which shall be
chosen by the farmers or land rights holders, shall also provide a
total package of production inputs and services, to include a unified
management system, organizational support, supply of key technologies,
equipment and other modernization requirements to put the Enterprise’s
productivity at par with international standards, and provide the
critical arrangements for an assured market. The type of services to be
provided by the Consortium shall be entirely demand-driven.
c. Trust
Agreement. The farmer or land rights holder and the Service Consortium
shall enter into a trust agreement defining the undertakings of both
Parties. The agreement shall include the (1) conveyance of the
usufructuary rights of the individual land rights holders to the
Farmers Trust to be formed under a Trustee Bank to be appointed by the
Parties; (2) package of critical services; (3) project inputs and
resources to be provided by the Service Consortium; (4) life term of
the agreement and exit options; (5) economic and equitable profit
sharing arrangement; and (6) other accountabilities and duties of the
Parties to the Trustee Bank as the enforcer of the agreement, the
custodian of the assets, cash flows of the project, and protector of
the rights of investors and creditors of the Trust.
d. Project
Securitization. The Farmers Trust Enterprise shall be funded mainly
through the capital formation or financing system of project
securitization as validly developed and practiced under Philippine
laws, which shall be structured appropriately to conform with the
nature of the varying assets, cash flows and business objectives of the
Enterprise as well as to provide adequate security and incentives for
the investors.
e. Asset Pool
Formation. The usufruct rights of the land holders and the assets and
receipts of the entire project or Trust Enterprise shall constitute the
Asset Pool of the enterprise. These assets shall be placed under the
trusteeship service of a reputable banking institution.
f. Approval of
Land Rights Conveyance. The conveyance of usufruct rights over
landholdings to a Farmers Trust shall be approved by DAR or DENR
depending on land jurisdiction, and shall bind the government to the
terms of the conveyance for the period of the Trust arrangement.
g. Enterprise
Business Plan. The project shall be governed in accordance with an
approved and disclosed Enterprise Business Plan, which shall show the
viability of the project and govern the implementation, receipts and
disbursement of funds, recovery/payment of investments and distribution
of the revenue/profits to the Parties to the Trust.
h. Project
Participation Certificates. The Farmers Trust shall issue Project
Participation Certificates to private investors, backed up by the
Trust’s asset pool.
i. Guaranty
Coverage. The Project Participation Certificates issued by the Farmers
Trust shall be extended appropriate guaranty coverage by the Quedancor.
j. Private
Nature of the Funds. The funds of the Trust shall be private in nature
and thus, shall be accounted and treated as private funds in accordance
with generally accepted auditing rules and standards.
k. Insurance
Coverage and Exit Option. The Farmers Trust shall provide insurance
protection to participating farmers and other groups in case of force
majeure or bad management by enterprise administrators by ensuring that
important decisions made by the Trust are duly consulted with all
participants of the trust arrangement. The Farmers Trust shall also
provide an exit option to the Parties.
Sec. 3. Program Committee. — A Program Committee
is hereby constituted to coordinate Program implementation and
formulate guidelines and mechanisms that will, among others, provide
additional protection to participating farmers and identify risk levels
and sharing arrangements of Trust participants.
The Committee shall be chaired by the Secretary of Agrarian Reform with
the Secretary of Agriculture, Secretary of Finance, Secretary of
Environment and Natural Resources and Quedancor President as members.
The Committee may call upon other departments and agencies for
assistance in the implementation of the Program.
Sec. 4. Funding Support for the Program. — The DOF
and its attached agencies are hereby directed to extend their support
to the capital formation strategies and measures that may be undertaken
for the Farmers’ Trust Development Fund, and to find ways and means as
may be legally feasible to enlarge and strengthen the guaranty
capability of Quedancor.
a.
Department of Finance. Pursuant to the objectives of the DOF to pump
prime or catalyze investments and economic activity in the agricultural
sector, the department is hereby authorized to provide assistance in
the following areas:
(1)
Project Preparation and Start-up Fund
To support the interim
requirements needed to firm up, document and start-up the specific
projects that form the basis of the Farmers Trust Development Fund, the
DOF is authorized to provide funding for these requirements.
(2) Farmers
Trust Development Fund and Farmers Trust Guaranty Fund
To catalyze and support the
establishment of the Farmers Trust Development Fund and the Farmers
Trust Guaranty Fund, the DOF is authorized to provide funds and
coordinate with other agencies, particularly the Bangko Sentral ng
Pilipinas, for other incentives needed.
(3) Sovereign
Guaranty
The DOF is authorized to issue
the sovereign guaranty of the Republic of the Philippines in accordance
with this issuance and the charter of Quedancor.
b. The Farmers
Trust Development Fund. The DAR, in coordination with the DOF, shall
cause the establishment of the Farmers Trust Development Fund under a
Special Purpose Vehicle (SPV), created according to and based upon an
acceptable and viable project as presented in an Enterprise Business
Plan and audited with due diligence. The SPV shall issue Farm
Development Trust Certificates, the proceeds of which shall finance
designated Farmers Trust Enterprises or purchase the Project
Participation Certificates thereof. The purchase of the Farm
Development Trust Certificates by banking institutions shall be deemed
as compliance with the Agri-Agra law under the alternative compliance
mechanism of PD 717.
c. The Farmers
Trust Guaranty Fund. The Quedancor is authorized to establish a Farmers
Trust Guaranty Fund to support the Program and guaranty the securities
issued by the Farmers Trust Development Fund in accordance with Sec. 23 of RA 7393 (Quedancor charter).
Sec. 5. Role of Quedan and Rural Credit Guarantee
Corporation. — The Quedancor shall extend utmost guaranty coverage
support for Project Participation Certificates issued for DAR-sponsored
Farm Development Trust Enterprises, as may be legally feasible and in
consonance with the broadened mandate of Quedancor under AFMA as well
as its original mandate.
Sec. 6. Agri-Agra Compliance. — The purchase of
Farmers Trust Certificates that may be issued for the financing of
Farmers Trust Enterprises take on the nature of loans extended to the
enterprise, which represent the associated interests of the members
and/or the joint venture.
The Project Participation Certificates, when duly covered by the
Quedancor guaranty system, merit treatment as eligible securities for
Agri-Agra law compliance. The Bangko Sentral ng Pilipinas shall provide
the necessary implementing rules and official issuances for guidance
and compliance by banking institutions. Additional incentives in the
form of additional eligibilities of the securities as bank reserves,
liquidity reserves and others may be considered.
Sec. 7. Applicability of the Trust Mechanism to
Other Rural Sector Activities. — The Trust mechanism as described and
authorized herein may be applied with appropriate modifications to
fisheries, pasture lands, forest lands and other productive enterprises
suited for consolidation.
Holders of agricultural lands under titled ownership or long-term lease
from government under pasture, forestry or other arrangements, may join
or initiate a Farmers Trust.
Such endeavors shall be subject to the approval of the DAR, DENR or DA,
depending on the land jurisdiction.
Sec. 8. Repealing Clause. — All issuances,
executive and administrative orders, rules and regulations or parts
thereof which are inconsistent herewith are hereby repealed or modified
accordingly.
Sec. 9. Effectivity. — This Executive Order shall
take effect immediately.
Done in the City of Manila,
this 27th day of September, in the year of our Lord, nineteen hundred
and ninety nine.
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Since 19.07.98.