Although it’s the second biggest penal facility by number of inmates in the Philippines, nothing much is known about the Davao Prison and Penal Farm (DPPF) in Davao del Norte province. Unlike Cebu City jail’s inmates, Davao penal colony prisoners aren’t internationally famous for well-coordinated dance moves that have gone viral on YouTube. Neither are they notorious drug lords who allegedly do deals with justice secretaries like some of their counterparts at the National Penitentiary in Muntinlupa, Metro Manila.
Instead, Davao prisoners grow Cavendish bananas on the penal farm’s land under a long-term joint venture agreement with the Tagum Agricultural Development Corp. (Tadeco), one of the country’s biggest banana growers and exporters. The fresh bananas are exported to Japan, China and other countries, earning millions of dollars for the Philippines.
Yet, Congress leaders and several key government agencies want the Tadeco deal with Davao penal colony scuttled for being allegedly unlawful.
In March 2017, no less than Pantaleon Alvarez, the speaker of the House of Representatives and one of President Rodrigo Duterte’s key political allies, sought an investigation into the deal. He also filed a plunder complaint against Rep. Antonio “Tonyboy” Floirendo Jr. before the Office of the Ombudsman for an alleged conflict of interest as a congressman and major owner of Tadeco.
Despite Floirendo being Duterte’s long-time political ally and biggest contributor in the 2016 presidential polls, key government agencies began to move against Tadeco. In short order, the Department of Justice (DOJ), the Office of the Solicitor General and the Commission on Audit (COA) issued opinions finding aspects of the Tadeco-Bureau of Corrections agreement irregular.
The COA and DOJ are urging the nullification of the JVA because the contract involves Tadeco’s utilization of more than 5,000 hectares of DPPF land. That ostensibly violates provisions of the 1973 and 1987 Constitutions setting the landholding limit for private corporations at only 1,000 hectares. The contract also allegedly covers inalienable lands that are “beyond the commerce of man.”
The original contract started in 1969 but was revised in 1979 and renewed in 2003 for another 25 years or until 2029. If the timetable is followed, the contract should last for a total of 60 years, which supposedly violates the Constitution’s 50-year limit on long-term lease of government-owned land. Some government lawyers argue that the contract should be terminated by 2019 to comply with the Constitution’s 50-year limit.
Responding to these allegations, Tadeco pointed out that the JVA was forged with the intention of providing livelihood, skills development and rehabilitation to DPPF inmates through the Farm Training Program. It also went through 14 past DOJ secretaries who all upheld its validity. In 2012, the House Committee on Agrarian Reform examined various supplementary contracts between Tadeco and BuCor and concluded these were beneficial to both the government and the community.
Ultimately, it will be the courts that will decide on the legality of the JVA between Tadeco and BuCor, and it will likely take months and years before they make a final decision. Meanwhile, here’s a guide for curious readers who are wondering what Tadeco and its JVA with the Davao penal colony are about.
What is Tadeco?
Tadeco is a 40-year-old banana producer and exporter and is the flagship company of the Anflo Management and Investment Corporation (Anflocor) Group of Companies owned by the Floirendo family, now led by Davao del Norte 2nd District Representative Antonio Floirendo Jr. The company is named after Tagum, the most populous component city in Mindanao and located about 55 kilometers from Davao City.
The congressman’s father was founded Tadeco and was the one who signed an agreement with the government to use some of the land belonging to the DPPF to grow bananas in 1969.
Prior to development, the area included in the JVA was comprised of swamplands. He was “a visionary man who saw what others could not,” said Angelie Malima, head of corporate communications at Tadeco. “Because of Don Floirendo Sr.’s vision and concern for the people, Tadeco has grown to what it is now,” she said.
In his memoirs, Senator Juan Ponce Enrile recounted that the American multinational United Fruit Company was the first to propose to grow bananas on land belonging to the Davao penal colony as early as 1963 during the Macapagal administration. However, the proposal was turned down because of opposition from some nationalist senators.
Floirendo did better when he put forward a similar idea in 1969 to the late President Ferdinand Marcos who immediately endorsed it to Enrile, then the justice secretary. Enrile approved the proposal, half-suspecting that Marcos “was somehow financially involved in the banana export project.” He noticed “the keen and unusual interest of President Marcos in pushing and expediting the banana project.”
How Big is the Land Area Covered by the JVA?
The JVA covers 5,308 hectares of the DPPF, an area bigger than the city of Manila. That’s more than 80 percent of the Davao penal colony’s total area, which now stands at only 6,396 hectares (it used to be almost 30,000 hectares but was reduced over time because of agrarian reform).
When the agreement with Tadeco was first signed in 1969, it covered only about 3,000 hectares. “It grew through a series of expansions over time. Because of the success of the JVA, the specific area covered under the venture increased over the years at the request of BuCor (Bureau of Correction),” says Malima. The bureau administers the penal farm.
While the JVA area covers most of the Davao penal colony, it makes up only a little over half of the 9,000 hectares of agricultural land being managed by Tadeco. This suggests that terminating the deal will have a bigger short-term impact on the penal farm compared to Tadeco. While the nullification of the JVA will affect 80 percent of the penal farm, it will impact only a little over half of Tadeco’s land area.
Indeed, Anthony B. Sasin, chairman of the board at Anflocor, revealed that they are already eyeing 2,000 hectares in Cateel, Davao Oriental in case the JVA contract is cancelled.
How Many Jobs Were Created Under the JVA?
As part of the joint venture agreement with the Davao penal colony, Tadeco employs 1,245 of the facility’s 6,115 inmates. The farm jobs not only help them earn money but also help them acquire skills that they’ll eventually need to live normal lives outside prison.
“Tadeco is committed to accommodating as many inmates as BuCor may supply. The selection and deployment of inmates is primarily done by DPPF officials. Two of the factors they consider when deciding are the prisoner’s good behavior and the number of guards [who can support the prisoner population at a given time],” Malima explained.
The jobs created by the JVA directly provide wages for around a fifth of DPPF inmates. These constitute less than a tenth of Tadeco’s total work force, which stands at about 13,000, according to Malima.
During a hearing at the House of Representatives, Tadeco President and CEO Alex Valoria said that the banana industry has already absorbed around 5,000 former DPPF inmates after their release from prison.
Valoria added that the company creates about 30,000 direct, indirect and ancillary jobs, affecting the livelihood of at least 181,000 Filipinos.
How Much Bananas Are Produced by Tadeco?
Tadeco produces an average of 418,950 metric tons of bananas a year. The company’s annual output is equivalent to 12.5 percent of the Davao region’s production and about nine percent of the country’s total output.
It exports products to markets such as China, Japan, Korea, Singapore, Russia and others under the Del Monte brand name. In an interview, Tadeco Vice President Alexis Cantil said their company accounts for 16 percent of the Philippines’ annual banana exports, which reached $730 million last year. That implies that Tadeco generated around $116.8 million of last year’s banana exports. The Bureau of Customs also recognized Tadeco as one of the Top 5 Exporters in the Davao region in 2016 and 2017.
How Much Revenue Does Tadeco Make?
Tadeco reported a net income of Php637 million on revenues of Php7.1 billion in 2015, according to BusinessWorld Top 1000 Corporations in the Philippines. That makes it the second biggest banana growing company by revenue after Sumifru (Philippines) Inc., a subsidiary of Japanese multinational Sumitomo Corp., which reported revenues of Php7.9 billion in 2015. Tadeco’s revenues have been growing steadily since 2010 when it reported gross sales of only Php4.9 billion.
How Much Taxes Does Tadeco Pay?
The company is also a top taxpayer, especially to local governments in the province of Davao del Norte. “Tadeco is a driving force to the local economy. We are one of the few banana companies fully complying with tax and labor obligations. Tadeco was instrumental to the progress of Tagum City, the creation of Panabo City, the municipalities of Carmen and Sto. Tomas, and the latest one, the municipality of Braulio E. Dujali. Because of Tadeco, many lives have been changed,” explained Malima.
In 2015, the company paid taxes equivalent to 1.93 percent of the annual revenue of Panabo City, 1.70 percent of Carmen’s, 2.29 percent of Sto. Tomas’ and 10.41 percent of B.E. Dujali’s. Specifically for B.E. Dujali, the company’s tax payments from 2013 to 2015 have consistently been above a tenth of the municipality’s annual revenue.
How Much Does Tadeco Pay the Government Under the JVA?
This is one of the issues at the heart of the controversy. Alvarez said that Tadeco pays the Bureau of Corrections only about Php25.54 million a year for the use of 5,308.36 hectares of the Davao penal colony. That translates to an average of only Php4,811 per hectare per year, which is way below the prevailing agricultural land lease rates in the Davao region. The House speaker alleged that the JVA works against BuCor “since the prevailing price of lease contracts in that area is Php25,000 per hectare per year,” he said.
However, Tadeco says otherwise. In 2016 alone, it claims to have paid almost Php143 million to the Bureau of Corrections as part of the joint venture agreement, according to Malima. Bulk of the payments goes to stipends and support for inmates, in compliance with the joint venture’s key purpose of providing livelihood to inmates. Other payments include Inmates Farm Training Support, Profit Share and Guaranteed Production Share.
The estimated production share for 2016 is Php32.1 million, which is computed from the contract’s base rate of Php26.5 million that increases by a tenth every five years starting from 2003.
“The contract’s nullification would impact BuCor since the JVA is a major source to augment their annual budget. As a matter of fact, six other penal colonies are dependent on the JVA proceeds for their facility improvements,” she added.
Chiara U. Mesiona is a Davao-based freelance business writer. Get in touch with her at chiara.mesiona.B2Bcopywriter@gmail.com