Agriculture and Fisheries Modernization Act

Policy and objectives of modernization

The State adopts a policy to enable those in the agriculture and fisheries sectors to participate in and share the fruits of development through efficient and sustainable use of national resources. (Section 2)
The State promotes food security, including sufficiency in rice and white corn, and optimizes the production of rice and white corn to meet local consumption through adequate State support. (Section 2)
The State uses a market approach in assisting agriculture and fisheries while recognizing their contribution to food security, environmental protection, and balanced urban and rural development, without neglecting consumer welfare, especially lower income groups. (Section 2)
The State empowers agriculture and fisheries sectors to develop and sustain themselves through principles of poverty alleviation and social equity, food security, rational use of resources, global competitiveness, sustainable development, people empowerment, and protection from unfair competition. (Section 2)
The Act’s objectives include transforming agriculture and fisheries into technology-based industries, enhancing profits and incomes (especially for small farmers and fisherfolk), ensuring stable food supply, and supporting integration, organization, and stronger negotiating positions through cooperatives and related entities. (Section 3)
The objectives also include market-driven competitiveness, moving products up the value-added ladder, inducing industry dispersal with backward linkages to agricultural resources, and providing social and economic adjustment measures that increase productivity while protecting the environment and equity. (Section 3)

Key definitions and covered terms

“Agrarian Reform Community” is a barangay at the minimum or a cluster of contiguous barangays with a critical mass of farmers or farm workers and centered on land tenure improvement and effective delivery of support services. (Section 4)
“Agricultural Lands” are lands devoted to or suitable for cultivation, planting, growing trees, raising livestock/poultry/fish/aquaculture, including harvesting and other farm activities in conjunction with farming operations by persons (natural or juridical) and not classified as mineral, forest, residential, commercial, or industrial land. (Section 4)
“Agricultural Land Use Conversion” is the process of changing agricultural land to non-agricultural uses. (Section 4)
“Agriculture and Fisheries Modernization” is transforming agriculture and fisheries into a dynamic, technologically advanced, competitive sector centered on human development, guided by sustainability and social justice. (Section 4)
“Cooperatives” are duly registered associations with a common bond of interest that voluntarily join to achieve a lawful common social and economic end, making equitable capital contributions and sharing risks and benefits under universally accepted cooperative principles. (Section 4)
“Strategic Agriculture and Fisheries Development Zones (SAFDZ)” are areas within the Network of Protected Areas for Agricultural and Agro-industrial Development (NPAAAD) identified for production, agro-processing and marketing activities to help develop and modernize agriculture and fisheries with government support in an environmentally and socio-culturally sound manner. (Section 4)
“Small Farmers and Fisherfolk” are natural persons dependent on small-scale subsistence farming and fishing as their primary income source. (Section 4)
“Small and Medium Enterprise (SME)” covers enterprises in industry, agribusiness and/or services with total assets (including assets arising from loans but excluding land where the office/plant/equipment are situated) with these categories: Micro – not more than PHP 1,500,000; Small – PHP 1,500,001 to PHP 15,000,000; Medium – PHP 15,000,001 to PHP 60,000,000, subject to adjustment by the Department in consultation with the Congressional Oversight Committee on Agricultural and Fisheries Modernization. (Section 4)

SAFDZ establishment, zoning, and conversion limits

The State declares a policy to ensure all sectors and regions have optimum opportunity to develop through rational and sustainable use of resources to maximize productivity, promote efficiency and equity, and accelerate modernization. (Section 5)
Within six (6) months after approval of the Act, the Department shall identify SAFDZs within the NPAAAD in consultation with LGUs, concerned agencies, NGOs, and organized farmers and fisherfolk groups. (Section 6)
SAFDZs serve as centers where development in agriculture and fisheries is catalyzed in an environmentally and socio-culturally sound manner, identified using criteria of agro-climatic/environmental competitive advantage, strategic infrastructure/location for agriculture and fisheries and industrial complexes, strategic market development and networking, and dominant presence of agrarian reform communities and/or small owner-cultivators and amortizing owners/agrarian reform beneficiaries and other small farmers and fisherfolk. (Section 6)
Each SAFDZ must have an integrated development plan with production, processing, investment, marketing, human resources, and environmental protection components. (Section 6)
The Department may designate ARCs and other areas within SAFDZ for economic scale production as model farms. (Section 7)
Farmers-landowners with lands in designated model-farm areas must be given the option to enter into management agreements with corporate entities for technology- and resource-enabled production and access to markets consistent with existing laws. (Section 7)
The Department, through the Bureau of Soils and Water Management (BSWM), shall undertake mapping of the network of agricultural and agro-industrial development areas for all municipalities and cities at an appropriate scale in coordination with NAMRIA and HLURB, and may call on other agencies for technical and logistical support. (Section 8)
Within one (1) year from the Act’s effectivity, the Department shall establish and delineate SAFDZ based on sound resource accounting in consultation with the Department of Agrarian Reform, Department of Trade and Industry, Department of Environment and Natural Resources, Department of Science and Technology, concerned LGUs, organized farmers and fisherfolk groups, the private sector, and communities, without prejudice to development of identified economic zones and free ports. (Section 9)
All irrigated lands, irrigable lands already covered by irrigation projects with firm funding commitments, and lands within SAFDZ with existing or potential capacity for growing high-value crops shall not be converted for five (5) years from effectivity. (Section 9)
Up to five percent (5%) of those SAFDZ lands may be converted upon compliance with laws, rules, regulations, executive orders and issuances, and administrative orders on land use conversion. (Section 9)
After the five (5)-year period, conversion is subject to: (1) a review of SAFDZ on productivity, quality of life, and efficiency/effectiveness of support services conducted by the Department and the Department of Agrarian Reform in coordination with the Congressional Oversight Committee; (2) conversion allowed on a case-to-case basis subject to land use conversion rules; and (3) in case of conversion, the land owner paying the Department an amount equivalent to government investment cost including inflation. (Section 9)
Within one (1) year from SAFDZ finalization, every city/municipality shall prepare a land use and zoning ordinance incorporating the SAFDZ where applicable. (Section 10)
Thereafter, land use plans and zoning ordinances must be updated every four (4) years or as often as deemed necessary upon recommendation of HLURB, and must be completed within the first year of the mayor’s term of office. (Section 10)
If cities/municipalities fail to comply, the DILG shall impose the penalty provided under Republic Act No. 7160. (Section 10)
All watersheds that are sources of water for existing and potential irrigable areas and recharge areas of major aquifers identified by the Department of Agriculture and the Department of Environment and Natural Resources must be preserved as such at all times. (Section 12)

Penalties for agricultural inactivity and conversion

Any person or juridical entity that knowingly or deliberately causes irrigated agricultural lands of seven (7) hectares or larger within protected areas to lie idle and unproductive for more than one (1) year, unless due to force majeure, shall be subject to an idle land tax of PHP 3,000.00 per hectare per year. (Section 11)
The same violator must put back such lands to productive agricultural use. (Section 11)
If continued agricultural inactivity exceeds two (2) years, unless due to force majeure, the land is subject to escheat proceedings. (Section 11)
Any person found guilty of premature or illegal conversion shall be punished by imprisonment of two (2) to six (6) years, or a fine equivalent to 100% of the government’s investment cost, or both, at the discretion of the court. (Section 11)
The accessory penalty for premature or illegal conversion includes forfeiture of the land and any improvement thereon. (Section 11)
After an administrative proceeding, the DAR may impose cancellation or withdrawal of authorization for land use conversion and blacklisting or automatic disapproval of pending and subsequent conversion applications filed with the DAR. (Section 11)

Agriculture and fisheries modernization planning

The Department shall formulate and implement a medium- and long-term Agriculture and Fisheries Modernization Plan (AFMP) in consultation with farmers and fisherfolk, the private sector, NGOs, people’s organizations, and appropriate government agencies and offices. (Section 13)
The AFMP must focus on five major concerns: poverty alleviation and social equity, income enhancement and profitability, global competitiveness, and sustainability. (Section 13)
The Department, with other concerned agencies, shall formulate medium- and long-term plans addressing food security, poverty alleviation, social equity and income enhancement based on goals and indicators including: availability of rice and other staple foods at affordable prices; reduction of rural poverty and income inequality; reduction of malnutrition incidence; reduction of rural unemployment and underemployment; and improvement in land tenure of small farmers. (Section 14)
The Department shall formulate plans aimed at global competitiveness and sustainability based on goals and indicators including increases in volume/quality/value of production for domestic consumption and exports; reduction in post-harvest losses; increase in processed products’ number/types and quality; increase in trading partners; increase in sustainable firms engaged in production/processing/marketing/export; increased entrepreneurship among farmers and fisherfolk; increased diversified-farming farms; and reduced use of harmful agro-chemicals. (Section 15)
The Department shall devise a method, in coordination with PAGASA and appropriate agencies, to regularly monitor and consider global climate change effects, weather disturbances, and annual productivity cycles for forecasting and formulating production programs. (Section 16)
The Department shall consider special concerns including WTO constraints, agrarian reform implementation programs, identification of SAFDZ, infrastructure and market support for SAFDZ, input/information/technology availability, credit programs, integrated R&D and extension, biodiversity and environmental preservation, responses to environmental threats, rural non-farm employment, fisherfolk access to aquatic resources, basic needs for impoverished sectors affected by liberalization, and concerns for indigenous peoples, rural youth, women, handicapped persons, and senior citizens. (Section 17)
The Department shall develop capability to monitor the AFMP through a Program Benefit Monitoring and Evaluation System (PBMES), and may secure independent consultants and external evaluators; it shall make periodic reports to the Congressional Oversight Committee. (Section 18)
All government units and agencies must support AFMP implementation, including: DPWH coordinating for infrastructure support; DILG assisting to mobilize local government resources; DTI, DAR, DOST, and DENR coordinating investment programs and activities; DepEd, TESDA, DOH, and DSWD coordinating on financial requirements of small farmers and fisherfolk to adjust; and DENR providing technical assistance and advice on SAFDZ delineation and environmental protection plans. (Section 19)
The referenced agencies must identify in their budget proposals the allocation intended for improving environmental and other conditions affecting agriculture and fisheries, and congressional initiatives through Committees on Agriculture of both Houses must be coordinated to complement and enhance AFMP programs and activities. (Section 19)

Credit program rules and funding structure

The State’s credit policy is to alleviate poverty and promote vigorous countryside growth through access to credit by small farmers, fisherfolk (particularly women involved in production/processing/trading), and SMEs and industries engaged in agriculture and fisheries. (Section 20)
Interest rates must be determined by market forces, provided that existing credit arrangements with agrarian reform beneficiaries are not affected. (Section 20)
The credit emphasis must be on proper management and utilization, with active participation of the banking sector and government financial institutions in the rural financial system. (Section 20)
The Department shall implement existing DCPs, but within four (4) years from the Act’s effectivity, it must phase out all DCPs and deposit all loanable funds (including CALF funds and new funds for AMCFP) for transfer of management to cooperative banks, rural banks, government financial institutions, and viable NGOs under the AMCFP. (Section 21)
Interest earnings on those deposited loan funds must be reverted to the AMCFP. (Section 21)
The agriculture, fisheries and agrarian reform credit and financing system must be designed for the use and benefit of beneficiaries including farmers, fisherfolk, those engaged in food and non-food production/processing/trading, cooperatives, farmers’/fisherfolk’s organizations, and SMEs engaged in agriculture and fisheries. (Section 22)
The AMCFP must package and deliver credit assistance for: production (including processing of fisheries and agri-based products) and farm inputs; work animals, farm and fishery equipment and machinery; seeds, fertilizer, poultry, livestock, feeds and similar items; procurement of products for storage/trading/processing/distribution; water pumps and tube wells for irrigation; construction/acquisition/repair of facilities for production/processing/storage/transport/communications/marketing and other support facilities; working capital for agriculture and fisheries graduates; agribusiness activities supporting soil and water conservation and ecology-enhancing activities; privately- and LGU-funded irrigation systems designed to protect the watershed; working capital for long-gestating projects; and credit guarantees on uncollateralized loans to farmers and fisherfolk. (Section 23)
The Department of Finance must commission an independent review of the mandates and programs of the Land Bank of the Philippines (LBP), Philippine Crop Insurance Corporation (PCIC), Guarantee Fund for Small and Medium Enterprises (GSFME), Quedan and Rural Credit Guarantee Corporation (Quedancor), and Agricultural Credit Policy Council (ACPC), and recommend policy changes and measures to induce private lending to agriculture and improve credit access by farmers and fisherfolk, with a longer grace period for long gestation projects based on the project’s economic life. (Section 24)
The review must start six (6) months after enactment; thereafter, recommendations must be made to appropriate Congressional Committees and to the Executive Branch for policy and program changes within six (6) months after submission. (Section 24)
The LBP shall focus primarily on plans and programs for financing agrarian reform and delivering credit services to agriculture and fisheries, especially small farmers and fisherfolk, consistent with its original mandate. (Section 24)
All existing credit guarantee schemes and funds applicable to agriculture and fishery sectors must be rationalized and consolidated into an Agriculture and Fisheries Credit Guarantee Fund, covering schemes operated by Quedancor, GSFME, and CALF. (Section 25)
The consolidated guarantee fund shall be managed and implemented by Quedancor, with board representation granted to cooperatives, local government units, and rural financial institutions. (Section 25)
Credit guarantee shall be given only to small-scale agriculture and fisheries activities and to countryside micro-, small, and medium enterprises, and it may also cover loan guarantees for purchase orders and sales contracts. (Section 25)
The Agriculture and Fisheries Credit Guarantee Fund shall be funded by at least ten percent (10%) of the funding allocation for the AMCFP. (Section 25)

Irrigation policy, systems, bidding, and fees

The State policy is to use natural resources rationally and equitably, prevent further destruction of watersheds, rehabilitate existing irrigation systems, and promote effective, affordable, appropriate, and efficient irrigation systems, adhering to comparative advantage in selecting location-specific irrigation projects. (Section 26)
Irrigation R&D must be pursued with priority for effective, appropriate and efficient irrigation and water management technologies, coordinated with DENR concerning watershed preservation and rehabilitation to support irrigation systems. (Section 27)
The selection of irrigation development schemes must be location-specific and based on criteria of technical feasibility; cost-effectiveness; affordability/low investment per unit area; sustainability and simplicity of operations; recovery of operation and maintenance cost; efficiency in water use; length of gestation period; and potential to increase unit area productivity. (Section 28)
All irrigation projects must be subjected to a social cost-benefit analysis in addition to the enumerated criteria. (Section 28)
Construction, repair, rehabilitation, improvement, or maintenance of irrigation projects and facilities must follow COA rules on simplified public bidding. (Section 29)
Irrigation projects funded partly or wholly through a loan from government financial institutions undertaken by farmers, farmers’ organizations, and other private entities are not subject to government bidding requirements. (Section 29)
The NIA must continue to plan, design, develop, rehabilitate, and improve the National Irrigation Systems (NISs) and maintain and operate major irrigation structures including headworkas and main canals. (Section 30)
NIA must gradually turn over operation and maintenance of NIS secondary canals and on-farm facilities to Irrigators’ Associations. (Section 30)
Within five (5) years from effectivity, the Department must devolve planning, design, and management of Communal Irrigation Systems (CISs) to LGUs, including transfer of NIA assets and resources relating to CIS; CIS development, construction, operation, and maintenance budgets must be prepared by and coursed through LGUs; NIA must continue providing technical assistance even after complete devolution as necessary. (Section 31)
The Department must formulate and develop a plan promoting private sector-led development of minor irrigation systems (including Shallow Tube Wells (STWs), Low-Lift Pumps (LLPs), and other inundation systems), and include the plan in the Short-term AFMP. (Section 32)
The Government must encourage irrigation facility construction through viable schemes such as build-operate-transfer, build-transfer, and other schemes to fast-track development. (Section 33)
To make BOT irrigation projects attractive, the national government must issue needed payment guarantees answering for default of the NIA, and the needed amounts for such payment guarantee are appropriated. (Section 34)
Upon effectivity, NIA must immediately review Irrigation Service Fees (ISF) rates and recommend reasonable rates to the Department within six (6) months from effectivity. (Section 35)
The Department shall monitor implementation of irrigation R&D programs and irrigation projects, review all existing irrigation systems every four (4) years for viability or ineffectiveness, and employ independent evaluators to assess overall impact. (Section 36)
Repair, maintenance, and rehabilitation of irrigation facilities, and BOT irrigation projects, are exempt from the election ban on public works. (Section 37)

Information, marketing, and trading linkages

The State policy is to empower Filipino farmers and fisherfolk (particularly women) through timely, accurate, and responsive business information and efficient trading services that link them to profitable markets, including innovative marketing support to generate maximum income. (Section 38)
A market information system must be installed for the use and benefit of, among others, farmers and fisherfolk, cooperatives, traders, processors, LGUs, and the Department. (Section 39)
The Department shall establish a National Marketing Assistance Program to create a national marketing umbrella matching supply and demand in both domestic and foreign markets to generate the highest possible income for farmers and fisherfolk or groups. (Section 40)
A National Information Network (NIN) must be set up from the Department level down to regional, provincial, and municipal offices within one (1) year from approval, taking into account existing information networks and systems. (Section 41)
The NIN must link research institutions for data access on agriculture and fisheries research and technology, and all departments/agencies/bureaus/research institutions/LGUs must consolidate and continuously update relevant information and make it available on the Internet. (Section 41)
The NIN must provide information and marketing services including demand data; price and price trends; product standards for fresh and processed agricultural and fisheries products; directories of cooperatives, traders, key market centers, processors, and business institutions at provincial and municipal levels; research information and technology; international/regional/local market forecasts; and resource accounting data. (Section 42)
The Department must provide technical assistance in setting up the NIN at the local level through cooperatives and LGUs, and at local level must ensure a system making marketing information and services available in the city/municipal public market for producers, traders, and consumers. (Section 43)
The Bureau of Agricultural Statistics shall serve as the central information server and provide technical assistance to end-users to access and analyze product/market information and technology. (Section 44)
The Department of Transportation and Communications shall provide technical and infrastructure assistance to set up the NIN, and LGUs and the Cooperatives Development Authority must coordinate for technical assistance to accelerate establishment and training of end-users and to train cooperatives on market information and technology analysis. (Section 44)
The NIN must be accessible to private sector entities engaged in agriculture and fisheries, and the Department must formulate guidelines and determine fees for private entities using the NIN. (Section 45)

Infrastructure coordination and market facilities

The Department of Public Works and Highways, the Department of Transportation and Communications, the Department of Trade and Industry, and LGUs must coordinate with the Department to address infrastructure requirements, and the Department and LGUs must strengthen agricultural engineering groups to provide necessary technical and engineering support for smooth and expeditious implementation of agricultural infrastructure projects. (Section 46)
Rural infrastructure prioritization must consider agro-industrial potential; socio-economic contributions; absence of public investment in the area; and presence of agrarian reform beneficiaries and other small farmers and fisherfolk. (Section 47)
Public infrastructure investments must give preference to cost-effective infrastructure types/models useful for production, conservation, and distribution of most commodities and benefiting the largest number of agriculture and fisheries producers and processors. (Section 48)
For private infrastructure primarily benefiting private investors, the State must facilitate purchase and use and keep bureaucratic requirements to the minimum for these investments, and private investors include cooperatives or corporations of agriculture and fisheries producers and processors. (Section 49)
DPWH must coordinate with the Department to determine priority order for public works funded under the Public Works Act that directly or indirectly affect agriculture and fisheries. (Section 50)
DOTC, Philippine Ports Authority, and Philippine Fisheries Development Authority must coordinate for priority fishports, seaports, and airports and to facilitate installation of bulk-handling/storage and other post-harvest facilities to enhance marketing, with fishports/seaports/airports equipped with quarantine, sanitary, and phytosanitary centers. (Section 51)
DOTC has the mandate to cancel arrastre and cargo handling franchises among operators it deems inefficient and/or ineffective due to factors including past under-capitalization, lack of equipment, and lack of professional expertise, and DOTC must recommend and consult with ship-owners and ship-operators in assessing cargo-handling capabilities before extending new franchises or awards. (Section 51)
The Department must coordinate with LGUs and resident farmers and fisherfolk to identify priority farm-to-market road locations based on the number of farmers/fisherfolk and their families who benefit and the amount, kind, and importance of local agriculture and fisheries products. (Section 52)
LGUs must make farm-to-market roads a priority investment and provide a counterpart of not less than ten percent (10%) of the project cost subject to their IRA level. (Section 52)
The Department must coordinate with DOE, DPWH, NEA, and NAPOCOR to identify and install appropriate energy sources, particularly non-conventional energy sources, to enhance agriculture and fisheries development. (Section 53)
The Department must coordinate with DOTC to facilitate telecommunication facilities in priority areas for agriculture and fisheries development. (Section 54)
The Department must coordinate with DPWH and LGUs for identifying and installing local water supply systems for agro-industrial uses to enhance agriculture and fisheries development. (Section 55)
The Department in coordination with other agencies must prioritize and facilitate funding infrastructure necessary for research ventures such as farm laboratories and demonstration farms with State colleges/universities that derive core funds from the Department. (Section 56)
The Department must coordinate with the Bureau of Post-Harvest for Research and Extension and the UP Los Baños Post-Harvest Horticulture, Training and Research Center to identify appropriate post-harvest facilities and technology needed for development. (Section 57)
The Department shall encourage LGUs to turn over management and supervision of public markets and abattoirs to market vendors’ cooperatives, and appropriation for post-harvest facilities must support market vendors’ cooperatives. (Section 58)
The Department must coordinate with LGUs on standardized market systems and sanitary facilities for food safety and quality, and markets must have specified sanitation and service features: sanitation unit, proper and adequate drainage and sewerage, ample water supply, public toilets with lavatories, garbage receptacles, ice plants and cold storage, adequate lighting and ventilation, and electricity supply, plus price monitoring bulletin boards for selected commodities and weighing scales accessible to the public. (Section 58)
Markets must observe proper protection and preservation of products, require foods needing no further cooking to be wrapped/covered/enclosed in containers to preserve freshness and prevent contamination, and prohibit selling products on market floors. (Section 58)
The Department must prioritize development and promotion of appropriate agricultural machinery and other agricultural mechanization technologies to enhance countryside agricultural mechanization. (Section 59)