ROUGH CUTS| The new LBP president’s proposal

“CORPORATIVE,” seemingly a new addition to the many economic lingo used by government to spruce up its foray into various enterprises aimed at achieving the so-called “inclusive growth” of the country’s economy.

But this idea of “corporative” as a strategy for economic emancipation seems to have evolved from the creative mind of a banker who knows exactly how the pulse of the people in the agricultural and fishing sectors beats, he being raised in an area where the economy is driven largely by the two industries – in Davao.

Yes, we take our hat off to newly installed Land Bank of the Philippines President (LBP) Alex Buenaventura from Davao who desires to disperse the benefits of the country’s economic growth to the countryside. And under this thrust of the largest government bank Buenaventura intends to develop the sectors of the small farmers and the fisher folks. To achieve this goal the “Promdi” LBP president wants to increase the exposure of the government bank to the agriculture sector from P37.9 billion to P115 billion or twice as much as the current loan figure.

At the same time Buenaventura is ensuring that his plan is not one reckless adventure that could result into the dissipation of the bank’s resources.  And he plans to do this by “reengineering” credit facilities for small stakeholders in both the farming and fishing sectors and encouraging them to enter into the “corporative.”

Under this scheme the new LBP head will initiate the formation of a new corporation that will manage the consolidated farms of small farmers as well as fishing ventures of small fishermen who will take part in the corporative. And to make sure that the LBP-initiated corporation cannot be tagged as government’s way of unfairly competing with commercial banking institutions Buenaventura’s proposal is for LBP to own only 40 percent and the 60 percent to be allocated to participating commercial banks.

Now, what will be the role of the small farmers and fisher folks? They will provide the manpower to keep their small farms and fishing ventures profitable.

What seems to be very enticing in the LBP President’s proposal is that 99 percent of the corporation’s earnings would be distributed to the participating farmers and fisher folks on a pro-rata basis depending on the value of their land ownership or fishing enterprise. Only 1 percent will be distributed as dividends of the corporate owners.

We can also see the Buenaventura plan as a work of an economic genius sprung from isolation in the rural areas. It can be clearly seen that the LBP honcho’s proposal will also be hitting not just one but two birds with one stone at the same time.

With the new corporation to be 60 percent capitalized by participating commercial banks Buenaventura sees this as an opportunity for the participating banks to fulfill their mandate under the Agri-Agra Law of allotting 15 percent of their loanable funds to farmers and fisher folks and another 10 percent to Agrarian Reform beneficiaries.

In effect the LBP, under this Buenaventura-designed scheme, will be helping participating commercial banks in the corporation that will be bankrolling the “corporatives” comply with the mandate of the law instead of being levied fines for failing to meet the mandate.

Now, there may be questions how this proposal will improve the lot of the farmers and fisher folks other than providing them easy access for funds to finance their farming and fishing endeavors.

Buenaventura envisions a mechanism that will make sure that in every harvest a portion of the farmers’ or fishermen’s profits earned would be used to buy equity in the corporation. In this manner they will slowly but surely assuming the 60 percent of the equity of the participating commercial banks until the latter’s shares are fully divested.

In other words, if the corporative business model of Buenaventura will get the nod of government banking and corporate regulators it is not far-fetched that small farmers and fishermen will soon be corporate stockholders themselves. And considering their number in the total population of the country the idea of “corporativism” is indeed one noblest way of working towards an inclusive economic growth.

Yes, it hurts to think that the Philippine economy is reported to be the fastest growing in the Asian region. Yet, this high growth seems felt only by the ten percent occupying the highest economic strata of society – they who are already rich and famous. The remaining ninety percent of the people continue to be waiting for such growth to trickle down to where they – in the quagmire of poverty.

Thus, we are looking forward to the fast fine-tuning of the Buenaventura “corporative” proposal and its even faster approval by regulators.

Let this inclusive growth strategy begin.

Again, this “provinciano” banker with his innovative idea is worth watching.

Posted in Opinion