The Sacred Compact with the Unifrutti Group recognized the “native title rights” of the Seven Tribes with a payment of P1,000 per hectare per year for its banana plantations and P500 per hectare per year for its pineapple plantations – which money goes into a Trust Fund for the empowerment of the Seven Tribes of Bukidnon.
The Sacred Compact with Hineleban Foundaton tasked Hineleban to jointly develop with the Seven Tribes working models of Kauyagan Food Self Sufficiency (3,600 sqm can feed a family of 7 with full nutritional requirements from indigenous crops) and for Sustainable Livelihood and Disposable Income from cash crops like coffee/abaca/cacao and tree plantations (5,000 sqm).
The model of Sustainable income is through Transformational Business Partnerships where small farmer/lumad producers are in partnership with corporations that provide Technology, Process Management, Quality Control, and Marketing in a transparent relationship where market profits are transparently shared back down to the small farmer/producer of the goods.
An example of this Tranformational Business Partnership in practice is Hineleban Coffee, where the lumad partners have sustained twice the yields per hectare and with prices per kilo that are 300% over trader prices, giving them incomes that are 600% higher than what they were ever able to achieve independently.
This same model of partnership can be implemented in the low lands, on a larger production scale though the Cooperative – Corporate Transformational Business Partnership
The CCTBP seek to address a variety of reasons causing coop venture failures, which include:
- Failure to apply production technology due to (a) lack of access to innovations in production technology and/or (b) lack of finances to afford these new technologies;
- In the midst of highly competitive, complex business environments, cooperative’s abilities to keep at pace with competition are set back by deficient experience in operations and process management;
- Inability to achieve the high quality standards of premium customers which results in high rejection (wastage) and discounted prices;
- Limited ability to establish long term contracts with customers to secure consistent supply providing a stable market at “fair” prices;
- In agriculture industry where cooperatives of agrarian reform beneficiaries are prominent, among the factors that adversely affect financial viability are use of sub-standard fertilizer/chemical inputs and poor pest and disease control practices resulting in low production;
- Such blips in the operations of cooperatives run by agrarian reform beneficiaries are often offshoots of inability to maintain adequate working capital during low production periods resulting in missed application of farm inputs that consequently result in low production;
- Many cooperatives face leadership credibility issues, i.e., accepting commissions from suppliers, misuse of funds largely due to failure to implement fiscal disciplines and systems of internal controls. Leadership conflicts result in the break up into smaller cooperatives which become non-viable production units;
To address the negative experiences of large corporations operating corporate plantations and the failures of most Cooperatives, the following are the key components of this new model:
- The company leases the land for 25 years – this allows the consolidation of land into economic size units, while recognizing that the owner of the land is not always the tiller of the land or the coop member. This also prevents the land (and therefore the Coop) from being chopped up into smaller and smaller units, as has frequently happened with Coops.
- The company then turns the land over to the Coops for the Coop’s development into its own plantation. Coops should be kept smaller to maintain better cooperation & integrity among their members. This reduces the rigorously contested annual elections of larger Coops that result in the losing party trying to split off.
- All “in-field” investments (growing crops, field irrigation, permanent in-field structures, etc) will belong to the Coop and be financed by Land Bank
- The Company will invest in all shared facilities like warehousing, processing plants/packing houses, main water supply, heavy equipment, etc.
- The Company shall also provide all necessary weekly inputs at cost to the Coops to ensure that they receive all production inputs when needed and of the quality needed. (Chemical residue has also become a major market issue)
- The Company will provide Technological improvements, training and assistance on Process Management, Quality Control, and Values Training
- The Company will also act as the collection agent for Land Bank, by deducting from sales proceeds the amount due to the bank.
- The pricing will be established from the beginning as sharing of the market price to provide the same return on investment to both the Cooperative and the Company in proportion to their corresponding investments.
- Note that this is a “Profit Sharing” arrangement between two Business Partners. It is not the traditional Buyer-Seller Relationship that has been disadvantageous to the small farmer Coops.
- As the market price moves up, there is an automatic adjustment in income received by the Coop, by the sharing in proportion to the investments. For example, in bananas, the cost of infield investments is about 50% of the total business Joint Venture costs. In other crops, the Coop share may be higher, but will not be below 50%.
- This arrangement also ensures that one party can not succeed without the other party also succeeding. The return on the corporation’s investment can only be assured by the equal return on the cooperative’s investment.
- The environmental standards proposed for both pineapple and bananas for the ARMM are the highest not just in the Philippines, but in the world. The standards are the model held up by environmental NGO’s. Similar environmental standards will be applied to coffee and abaca.
- No irrigable rice lands may be converted to any other crops.