Taiwan Today

I. Foundation Whereon the Credit of the Land Bonds in Kind is Built On his fourth trip to Taiwan last July, Dr. Wolf I. Ladejinsky, the American land expert, highly commended the achievements of our Land-to-the-Tiller program. He mentioned three factors which, in his opinion, led to its success: (1) adequate preparation, (2) speedy enforcement, and (3) issuance of Land Bonds in Kind. He was especially emphatic on the importance of the land bonds in kind, and thought that Japan's failure to make use of a similar device in her land reform was a matter for regret. As Dr. Ladejinsky's remarks are based on personal observations, they should not be regarded as mere empty praise. As a result of the post-war inflation and the consequent depreciation of the Japanese cur­rency, the bonds payable in cash which the Japanese landlord received as compensation for his land were not worth much and the whole arrangement looked almost like confiscation. But our method is different. The lands purchased by the Government under our Land-to­-the-Tiller program in Taiwan are paid for with Land Bonds in Kind, which are expressed in terms of rice or sweet potato and whose value will not change so long as the quantity of rice or sweet potato remains unchanged. This will not only give full protection to the landlord in respect of the compensation he ought to receive from the Government for the purchase of his land, but also serve to exert a stabilizing influence on the social economy as a whole. The most important question relating to the Land Bonds in Kind has to do with the maintenance of confidence in their credit. In other words, there must be reasonable guarantee that both principal and interest on coupons that have matured will be paid in full. In order to do that, the Government must have enough rice on hand before any particular installment is due. The necessary rice must be available, because it is provided in Article 5 of the Regulations Governing the Issuance of Land Bones in Kind, Taiwan Province, that the bonds are secured by proceeds from the resale to the tenants of Government purchased land and are further guaranteed by the Provincial Treasury of Taiwan. Moreover, Article 6 of the said Regulations also provides for the setting up of a Land Bonds Redemption Guaranty Fund to be used for making payments to landlords in case there should be a delay in the payment of installments by the land purchasers or when they are exempted from making such payments for the land they have purchased due to crop failures or other causes. With these provisions in mind, we should be justified in concluding that the credit of the Land Bonds in Kind will be maintained. As to the Land Bonds Redemption Guaranty Fund itself, there are two possible sources of income which can be earmarked for the purpose. One is the proceeds from the sale of public land and the other is the proceeds from the sale of the Government enterprise stocks. The proceeds from the latter source, according to current calculations, amount to 20 million kilograms of unhulled rice for each semi-annual installment, or 40 million kilograms per annum. If this amount can be used to augment the Land Bonds Redemption Guaranty Fund, the credit of the said bonds can be maintained so much the better. Though the payment of both principal and interest on the Land Bonds in Kind depends partly on the setting up of a Land Bonds redemption Guaranty Fund, the foundation on which the credit of the bonds is built is after all the assurance that the tenant purchasers will pay he installments of the land price regularly and promptly as they fall due. If the tenant purchasers pay each installment of the land price in full and on time, the Government in its turn will be able to meet its obligations in respect of the Land Bonds in Kind. In this way, the Land Bonds in Kind will be resting on solid foundations. II. Payments Effected on the First Installment of the Land Price When the Land-to-the-Tiller program was being launched in Taiwan, certain observers were rather doubtful whether the Government would be able to collect the land price from the tenant purchasers in full as each installment fell due. These observers pointed out that if under the old system of land tenure the landlords had been unable to collect the full amount of the farm rent from their respective tenants, the Government now could hardly expect to collect all the land price from tens of thousands of farming families that are scattered all over the Province. They were afraid that there would be many defaults in payment by the tenant purchasers and that the Government, if it tried to pay all the principal and interest on the Land Bonds in Kind as they fell due, would have to incur financial losses in the transaction. They predicted that, within ten years, the Government would be financially bankrupt without having realized the objective of land reform. But, as a matter of fact, the tenant purchasers were extraordinarily enthusiastic in paying the first installment of the land price. Up to the end of August, the payments effected were on the average 98 per cent of all payments due for the Province as a whole, and, in the case of some Hsien and Municipalities, as much as 100 per cent. The forecasts of the pessimists have been belied. According to the latest statistics compiled by the Provincial Land Bureau on the basis of reports submitted by the different Hsien anti Municipalities on the collection of the first payment of the land price by tenant purchasers, the amounts receivable, exclusive of exemptions due to crop failures, were at the end of August 68,525,336 kilograms of unhulled rice and TW$23,987,514 of sweet potato expressed in monetary terms; and the amounts actually received up to the end of August were 67,216,­508 kilograms of unhulled rice and TW$23,613,802 of sweet potato expressed in monetary terms. The ratio between the amount receivable, and that actually received was 98.09 per cent in the case of unhulled rice and 98.44 per cent in the case of sweet potato expressed in monetary terms. The payments effected on the first installment of the land price are such a high percentage of the amounts receivable, mainly because the peasants have a clear and correct understanding of the Land-to-the-Tiller policy and support it with their whole heart. Though many tenants used to default in rent payments under the old system of land tenure, they are now perfectly willing to pay the land price, for they know that the land is theirs to keep. They know only too well that the installments they are paying are simply investments, and that as soon as all the installments have been paid they will enter into full possession of the lane. They are willing to economize even on food and clothing in order to save enough to pay for the land, owing partly to their desire for landownership and partly to their appreciation of the beneficent motive behind the Land-to-the-Tiller policy. Given such a cooperative attitude on the part of the tenant purchasers, one has good reason to expect that the other nineteen installments will be paid with equally good grace, as they fall due. On the basis of the results so far achieved, we are more con­fident than ever that the Land-to-the-Tiller program will be successfully carried out. III. Reasons Why There Are a Few Cases of Defaults in Payment Up to the end of August, defaults on the payment of the first installment of the land price are less than 2 per cent of the total amounts receivable, as we have just shown. According to the provisions of the Land-to-the-Tiller Act, the Government will take back the land from a purchaser if he fails to make any of the installment payments on the purchase price for over four months after it has fallen due and the case will be referred to a court of law for enforcement. Therefore, in order to protect their own best interests, the peasants should not default on the installment payments except in cases of crop failure or other force majeure. On the other hand, in order to avoid possible difficulties in compulsory enforcement by courts of law, the Government should continue to permit payments to be made, though somewhat belatedly, so that the defaults may be reduced to a minimum in the final analysis. On our trip of inspection undertaken in late August in the company of Mr. Huang Chi-lu, Minister of the Interior, and Mr. Shen Shih­-ko, Director of the Provincial Land Bureau, we tried to discover the causes which had led to defaults on the first installment payment of the purchase price. The following are some of the reasons we have ascertained: 1. Failure to Report Crop Failures or Non-Approval of Requests for Exemption. Accord­ing to Article 26 of the Land-to-the-Tiller Act, in case of crop failure the tenant purchaser may be permitted to postpone the payment of that particular installment of the purchase price, if the case is reported to the Government and, after due investigation, found to be true. According to the Regulations Governing the Implementation of the Land-to-the-Tiller Act, any crop failure on the land resold by the Government to a tenant purchaser should be reported by the purchaser, within ten days after its occurrence, to the Village, Township, or District Office, which will proceed to make a thorough investigation of the case and report it to the Hsien or Municipal Government concerned for approval; and the results of the said approval should be notified to the Land Bank. These are complicated procedures, of which the peasants might have been ignorant and have failed to comply with. Or the re­quests for exemption might have been turned down, because the ten-day time-limit had expired at the time when the requests were made, or because the crops had been cut down when the Village, Township, or District Office proceeded to make an investigation of the case. Cases of this kind were more numerous in the Taichung-Changhua area than anywhere else. 2. Non-Acceptance of Payments Owing to Poor Quality of Rice Resulting from Natural Causes. According to the regulations of the Taiwan Provincial Food Bureau, all payments in kind have to conform to certain standards in order to be officially acceptable: the standard in the case of unhulled rice is that six Taiwan pecks (tou) of it must weigh 96 Taiwan catties. In case six Taiwan pecks (tou) of unhulleed rice weighs between 91 and 95 Taiwan catties, the rice may be accepted with an extra payment of 4 Taiwan catties to make up for its poor quality. Similarly, if that quantity of unhulIed rice weighs between 86 and 90 Taiwan catties, it may be accepted with an extra payment of 9 Taiwan catties for the sale reason. But if the same quantity of unhulled rice weighs below 86 Taiwan catties, it will not be accepted at all. The payments which many farmers in the Taichung-Changhua area tried to make on the first installment of the land price were made with unhullee rice of poor quality that weighed less than 86 Taiwan catties per six Taiwan pecks (tou) owing to injuries done to the plants by typhoons; and for that reason the payments have not been accepted. This accounts for some of the defaults which we are discussing. 3. Non-Payment Due to Differences in Time between the Installment Periods and the Harvest Seasons. The semi-annual installment payments provided for in the regulations do not happen to coincide with the harvest seasons on the rotation land, the single-crop land, the single­ season land, the orchards, and the tea plantations, so that it is impossible for the peasants to make any payments before the ripening of the harvest. This is especially true of lands for the planting of sugar canes which require 18 months for growth. 4. Non-Payment Due to Failure to Apply for Registration of the Land Purchased. Certain tenant purchasers have failed to apply to the Government for the registration of lands they have purchased directly from the landlords. But as the transactions have been made without official cognizance, such lands are still being listed by the Government as lands for resale. This led again to the non-payment of the first installment of the purchase price in so far as the Government is concerned. 5. Non-Payment Due to the Tenant's Refusal to Purchase the Land. Certain lands may be unattractive owing to poor productivity or low rentals, and the tenants may be unwilling to purchase them because of poor yield or high cost. Naturally, such tenants will refuse to pay any installment of the lane price. 6. Non-Payment Due to Disputes over the Right of Ownership. Pending the judicial settlement of disputes involving the ownership of certain lands, no payment can be expected from their prospective purchasers. 7. Incapacity to Pay. Some tenant purchasers are unable to pay the first installment of the purchase price, simply because they do not have the means to do so. 8. Other Causes. Some peasants were unwilling to pay the heavy cost of transportation and resorted to delaying tactics in effecting the payment on the first installment of the purchase price. Still another cause of delay in payment is found in the refusal of one brother to bear part of the burden, because the land has been purchased under the name of another brother although the understanding between the two is that they are to own and cultivate it in common. A further cause of non-payment, which concerns only small pieces of land, is that a part of the land has been washed away by floods and the crop is a partial or complete loss. Finally, a word should be said about the operating condition of private barns, which were officially designated by the Government as agencies to which the peasants might deliver the rice in payment of the purchase price of land. In a few cases the peasants had delivered the rice to one of these barns in payment of the first installment, but the barn subsequently closed down without turning the rice already paid in by the peasants over to the Government. It would be extremely unfair for the Government to regard cases of that kind as defaults, as it is said to be doing, for the peasants have already effected the payment to a properly designated agency. If that agency should close down subsequently to the payments, the peasants cannot be charged with the non-payment of the installments due. IV. Recommendations for Improvement In view of the above-mentioned causes which have led to the non-payment of the first installment of the purchase price, certain measures for the improvement of the situation in the future suggest themselves for consideration. Theses may be summarized under the following headings: 1. Strengthening the Basic Working Staff: The work of collecting the installment payments of the land price must be done by the Land Bureau, the Food Bureau, and the Land Bank in close cooperation with one another. The Lane Bureau is the executive agency, the Land Bank the accounting agency, and the Food Bureau the agency for the receiving and paying and safekeeping of foodstuffs. Such being the close relationship among the three agencies, it is recommended that there should be both on the Provincial and the local level, some kind of coordinating group or meeting so that they can exchange information from time to time, solve all problems as they arise, and discuss and adopt better methods for the collection of the land price. In order to achieve better coordination in lane, administration, an important prerequisite is the strengthening of the basic working staff. With the enforcement of the Land-to-the-Tiller law, the tasks of land administration have multiplied. As these tasks are scattered all over the rural districts, there should be, as recommended by Mr. Wang Wen-yi, Chief of the Land-to-the­-Tiller Program Joint Supervisory Team, set up in each Village and Township Office a separate staff of land administrators. We are heartily in favor of Mr. Teng's recommendation and hope for its early realization. If such a staff of three members is set up in every Village and Township Office, then we shall have more than 1,000 new staff workers throughout the whole Province. This number of competent staff workers can be easily selected from among those who are being currently employed to assist in the implementation of the Land-to-the-Tiller program. We are confident that the presence of a capable staff in all the Villages and Town­ships will not only help the routine tasks of land administration at the grassroots, but also facilitate the collection of the installment payments of the land price in the future. 2. Unifying the Measures Governing Crop Failures: There is no uniformity in the laws and regulations governing the reporting and investigation of crop failures. Requests for remission or postponement in the payment of the farm land tax of farm rents, of the purchase price of public lands, and of private farm lands purchased under the Lane-to-the-Tiller program in case of crop failures are based upon different laws and regulations. The remission or postponement of the farm land tax is governed by the Regulations Governing the Reporting and Investigation of Crop Failures; that of farm rents by the Farm Rent Reduction to 37.5% Act; that of the purchase price of public lands by the Regulations Governing the Sale of Public Lands to Establish Owner-Farmers in Taiwan; and that of private farm lands by the Land-to-the-Tiller Act. Since different laws and regulations apply in the different cases, naturally there must be different norms and standards in their practical application. For example, in respect to the reporting of crop failures, the Farm Rent Reduction to 37.5% Act provides that the requests be made to the Village or Township Farm Tenancy Committee; and the Regulations Governing the Reporting and Investigation of Crop Failures and the Land-to-the-Tiller Act provides that the requests be made to the Village or Township Office. Again, in respect of the remission or postponement of payments due to crop failures, the Regulations Governing the Reporting and Investigation of Crop Failures provided for the total remission of the farm land tax if the harvest falls below 30 per cent of the normal crop, an 80 per cent remission if the harvest is between 30 and 40 per cent of the normal crop, a 60 per cent remission if the harvest is between 40 and 60 per cent of the normal crop, and a 50 per cent remission if the harvest is between 60 and 70 per cent of the normal crop. But the analogous provision of the Regulations Governing the Implementation of the Land-to-the-Tiller Act reads: A 30% postponement in the payment shall be permitted in cases in which the crop failure is not less than 30 %; a 50 % postponement in cases which the crop failure is not less than 40%; and a 100% postponement in cases in which the crop failure is over 50 %." Such complex provisions are a veritable maze to the simple-minded peasants. The consequence is that where a crop failure should be reported to the Village or Township Office they report it to the Farm Tenancy Committee. The differences in the percentage of crop failure in relation to the percentage of remission or postponement of payment have also given rise to endless confusion. Owing to the complicated provisions governing crop failures, many peasants failed to pay the first installment of the purchase price within the prescribed time-limit last summer. Sixty per cent of the defaults in the payment of the land price in the Taichung-Changhua area were traceable to this cause alone. This fact shows how serious this aspect of the problem is. We recommended therefore, that all the laws and regulations governing crop failures should be revised and that, after the revision, there should be uniform provisions governing: (a) the percentage of remission or postponement of payment, (b) the governmental offices to which all crop failures should be reported, (c) the personnel responsible for the investigation of crop failures, and (d) the time of investigation. 3. Providing for Agricultural Loans: It has been ascertained that some tenant purchasers resorted to the loan sharks to raise money for the payment of the first installment of the land price, either because they were too poor and unable to meet the obligations or because their crop had not yet ripened at the time. As such practices are likely to impoverish the peasants and reduce agricultural production, we must do all we can to provide them with low-interest loans in order to free them from the clutches of the usurer. We know that at the time of the first installment payment of the land price the Land Bank of Taiwan did grant low-interest loans to the peasants. But the total amount of such loans was only NT$800,000, which represented merely 0.4 per cent of the total land price payable by the tenant purchasers. It is learnt that the Ministry of Finance has drawn up a plan for an initial production loan of NT$74,000,000 to be granted to tenant purchasers under the Land-to-the-Tiller program in order to take the place of private loans. If this sum of money is properly used, it will directly benefit the individual farmers by relieving them of part of the economic pressure, and indirectly facilitate the collection of the later installment payments of the land price. 4. Bettering the Methods of Managing the Barns: The land price to be paid by tenant purchasers in terms of unhulled rice is receivable on the account books by the Land Bank which, however, does not handle the rice itself but requests the Food Bureau to designate certain local barns to do the receiving and paying and safekeeping of the rice. Some barns belong to the Farmers' Associations and some to private individuals. They are located in the different Villages and Townships all over the Province, but their distribution is not even and their number is far from being adequate. They are more numerous in the easily accessible and prosperous districts than in the less accessible and­ poorer regions. As a result of this uneven distribution, certain farmers who live far away from any barn would delay the payment of the land price because they were unwilling to bear the heavy cost of transportation. We recommend that the Government help the local Farmers' Associations to set up more barns at such places and that the barns in the mountainous regions be provided with transportation facilities to be placed at the disposal of the peasants by charging a reasonable fee for the service. In this way, the transportation difficulties will be solved and the payment of the land price by means of unhulled rice will be facilitated. In handling the rice paid in by the tenant purchasers as the first installment of the land price, most barns have done an efficient job of their work. But there were certain barns, especially the private ones, which did not come up to the required standards in construction and equipment, and which were not properly managed, thereby causing both the Government and the peasants to incur losses. We recommend that the Government exercise strict supervision over the barns and that any such illegal suspension of business and closing down be dealt with the utmost severity. But once any given barn has been officially designated as a receiving agency for the Government, the latter shall be held responsible for all losses if the barn should close down after the peasants have effected their payments. As the payment of the installments on the purchase price of land will continue for a period of ten years, the example of the first installment payment is likely to be followed in the case of the later payments. That is why we have taken the trouble to discuss somewhat in detail the successes and failures of the first installment payment, so that there may be improvements in the future.