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Aerobic rice technology was first introduced in the Philippines by the International Rice Research Institute (IRRI) approximately ten years ago. Field trials and experiments were established in the provinces of Tarlac and Nueva Ejica. The technology showed favorable impacts. Its potentials, as well as the challenges that could befall, were identified. It was found out that while aerobic rice technology could help reduce water requirement by 30-50% during the dry season thereby decreasing input cost, the yield could decline by 15-20%. In response to such adverse outcome, this technology is best adopted to rainfed areas that are generally productive only during the rainy season, and left idle during the dry season.