Facing the Challenges of the Philippine Coconut Industry the Lifeblood of 3

FACING THE CHALLENGES OF THE PHILIPPINE COCONUT INDUSTRY: THE LIFEBLOOD OF 3.4 MILLION COCONUT

FARMERS AND FARM WORKERS

Joey Faustino

August 2006

DISCLAIMER

“The views expressed in this report are strictly those of the authors and do not necessarily reflect those of the United States Agency for International Development (USAID) and the Ateneo de Manila University”.

Abstract This paper assesses the coconut industry by first surveying basic facts about the industry – its contribution to the national economy, the composition of its export earnings, the decline in coconut productivity coupled with coconut tree cutting and land conversion. The study observes that although small coconut farmers and farm workers constitute 92% of the industry’s workforce which supplies over 40% of the value of agricultural exports, they have remained gravely marginalized. This is due to lack of control and ownership of land, imperfect competition downstream in the supply chain, limited participation in policy and decision-making processes, and foreign market control and disadvantageous international trade policies. The study discusses government initiatives for industry and farmer development, the coco levy controversy and the status of coco levy related cases. Finally, this industry assessment gives policy recommendations for industry and farmer development and coco levy recovery.

FACING THE CHALLENGES OF THE PHILIPPINE COCONUT INDUSTRY: THE LIFEBLOOD OF 3.4 MILLION COCONUT FARMERS

AND FARM WORKERS

EXECUTIVE SUMMARY

The state of the Philippine coconut industry is that of an enormous

paradox – an irony of incessant proportions.

While the industry is a major contributor to the national economy,

government hardly appropriates enough for its development. Perennial

problems had been left ignored for decades, thus, pushing the industry

from bad to worse. The continuous decline in copra production, for

example, had long been expected as the rate of senile and nutrient

deficient trees increase every year but hardly can the Philippine Coconut

Authority attune its programs with the meager budget it obtains.

Copra trading have proven to be a vast source of wealth for the

industry’s stakeholders but some 3.4 million small coconut farmers and

farm workers live in dire poverty. Big companies and individual dealers

find copra trading to be very profitable but a coconut farmer with one

hectare can hardly cope with an average earning of Php 30 per day at a

relatively decent price of Php 17 per kilo at the farm gate.

With barely two years left for the completion of the Comprehensive

Agrarian Reform Program (until 2008) coconut lands, comprising twenty-

five percent of the country’s total agricultural area, constitute the biggest

balance (estimated 60%) of undistributed lands by the Department of

Agrarian Reform.

Coconut had always been the country’s top agricultural export. Eighty

percent (80%) of the country’s total copra production sees its way into the

export market while twenty percent (20%) is consumed locally. But

coconut lands are not regarded as prime agricultural lands by the

Agricultural and Fisheries Modernization Act (AFMA) since these lands

are usually not irrigated.

The Coconut Preservation Act of 1995 was passed into law to abate

indiscriminate cutting of coconut trees as it might prove to be detrimental

to the dollar-earning industry but the same had been the source of

rampant cutting in its implementation. More over, the Philippine Coconut

Authority estimates the ratio of replanting at 1:23, 1 seed nut planted for

every 23 cut.

One hundred to a hundred and fifty coconut trees are normally planted

to a hectare. The actual space occupied by the trees covers only twenty

percent (20%) of the land area but the remaining eighty percent (80%) is

seldom optimized by the farmers. Two-thirds of 3.2 million hectares

devoted to coconuts are monocropped.

Tons of research papers on the industry grow on desks of government

and private institutions. Various technologies for coconut processing have

been made but only very few reach the actual production areas. Until

today the farmers burn the higher value coconut husks / shell to dry the

lower value output that is copra.

In 1996 the Philippine Coconut Authority launched the Small Coconut

Farmers Development Program and distributed chemical fertilizers to the

farmers for free through the government-initiated Small Coconut Farmers

Organizations (SCFOs). The program, though, was a US$ 121 million loan

Joey T. Faustino EPRA Paper/ Executive Director Coconut Industry Reform Movement, Inc.

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from the World Bank. Most of the farmers did not use the fertilizers for

their coconuts but for some other purpose. Some reported sightings of

fertilizer bags in huge quantities ending up in warehouses.

Coconut oil offers a great deal of health, wellness and ecological

qualities but the American Soybean Association lobbies rigidly to brand it

as saturated animal fat for obvious reasons of trade protectionism.

The “Tree of Life” – in reference to its numerous uses – remains to be

an insignificant label as the country had largely limited itself to producing

traditional products such as copra and coconut oil. Stiff competition for

lauric and vegetable oils in the international market has yet to affect the

industry’s dependence on traditional exports.

Practically thriving on its own with very minimal intervention from

government, a levy was imposed on the first sale of copra to generate

huge sums of money that may be used to develop the industry and uplift

the lives of the coconut farmers. But under Martial Rule the coconut

farmers found themselves beholden to a monopoly set up from their own

contributions by a handful of cronies. The coco levies ended up in the

names of private persons and entities.

The irony also comes with a positive tenor. Bleak as it appears the

coconut industry is yet facing a rebirth with recent events that should be

beneficial enough to drive government and the stakeholders to nourish the

potentials of the once robust industry.

The qualities of coconuts are gaining fast recognition from both local

and abroad. Last November 2005 Dr. Justino Arboleda’s coconet (coconut

geotextile) won the “First World Challenge Contest” sponsored by

Newsweek Magazine and the London-based British Broadcasting


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Corporation (BBC). The contest included entrepreneurs worldwide whose

projects are environmental friendly and helpful to communities.

The virgin coco oil is taking both local and foreign markets by storm for

its health benefits and the “clean air” biodiesel (a.k.a. coco methyl ester)

emerged in the middle of a fuel crisis caused by soaring global prices of

petroleum products.

The Executive Branch had already supported such developments with

favorable policies. Malacañang issued Memorandum Circular No. 25

directing the Department of Public Works and Highways to use the

coconet to prevent and control soil erosion. The President had also issued

Memorandum Circular No. 55 directing all departments, bureaus and

offices to incorporate the use of one percent (1%) by volume coconut

methyl ester in government’s diesel requirements. Cities of Marikina,

Davao, Baguio and Makati had adopted the use of coco-biodiesel. As for

the virgin coco oil, quality standards1 have been set and the product is

now carried by no less than a multinational company.

Cash-strapped as it is government always considered itself to be

incapable of financing programs to develop the coconut industry.

However, since 2001 a series of positive decisions on the coco levy cases

were handed down by the Supreme Court and the Sandiganbayan. The

decisions favored government and the coconut farmers in the recovery of

sequestered assets bought with the use of coco levy funds. The Supreme

Court categorically declared coconut levy funds as prima facie public

funds. This ended the long years of legal debate on the nature of the said

funds. Private interests led by Eduardo Cojuangco, Jr. claim ownership of

the assets in lieu of a Presidential Decree (PD No. 1468) issued by

Ferdinand Marcos under a dictatorship.


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The Sandiganbayan, in separate Partial Summary Judgments, ruled

that 72.2% shares of the United Coconut Planters Bank (UCPB), the

Coconut Industry Investment Fund (CIIF) Oil Mills, the fourteen (14)

Holding Companies and the so-called CIIF-San Miguel Corporation (SMC)

shares are owned by government in trust for all the coconut farmers. This

brings government closer than ever to gaining a substantial amount from

the sale of these assets – the CIIF-SMC shares alone carries a market

value of more than Php 50 billion. The Office of the Solicitor General had

filed separate Motions for Writ of Execution on the said cases and is

currently awaiting Sandiganbayan’s ruling.

Pursuant to the Supreme Court decision of December 14, 2001 the

government should be able to mobilize these resources for the specific

purpose for which it was collected – the development of the industry and

its farmers. The huge assets have been lurking under sequestration for

fifteen years before a clear-cut judgment was rendered. Since the time the

coco levy was collected (1973) coconut farmers had continuously

plummeted to deeper poverty while the assets and shares have grown

tenfold. The combined coconut levy assets are now estimated to be worth

more than a hundred billion pesos (Php 100 B). Having the character of a

public fund government would have the opportunity to deliver justice and

relieve the socio-economic conditions of the lot of coconut farmers through

meaningful programs. In order to guarantee good governance of such

huge funds it is imperative that structures and mechanisms of

administration, management and utilization ensure the participation of the

coconut farmers, the contributors to the coco levies.

Unfortunately, and again ironically, the current thrust of the Presidential

Commission on Good Government (PCGG) is to find means for an out-of-

court settlement with Eduardo Cojuangco, Jr. and his co-defendants. For

political reasons the cases won during the incumbency of the late Haydee


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Yorac in the PCGG had been sidelined by her successor Camilo Sabio – a

simple case of the winning party initiating the amicable settlement.

Various reactions hound the PCGG today for coming up with such a

skewed position. Informed coconut farmer groups are calling for the

resignation of Chair Camilo Sabio. Former Senator and first PCGG

Chairperson Jovito Salonga opined that entering into a compromise with

Cojuangco at this point would “be sheer irresponsibility bordering on

ignorance.” But whether the outcome is that of a Writ of Execution granted

by the Sandiganbayan or an amicable settlement – if at all to be allowed

by the Courts – government is certain to lay hands on a very substantial

amount of recovered coco levy assets.

What then is to be done with it remains to be seen as a variety of

political poles and business interests, within and outside of the industry,

can be expected to lock into an intense tug-of-war to wrestle control over

the huge funds. But what should ultimately serve as bases for the next

step is a serious look into the condition of the coconut industry and the

millions of impoverished farmers and farm workers as reaffirmed by the

series of court decisions on the coconut levy cases.

In the words of the Sandiganbayan in denying Cojuangco’s Motion for

Reconsideration on December 28, 2004:

It is high time that the real beneficiaries of the coconut levy funds, the

coconut farmers who contributed to it, and the entire coconut industry be

given a chance to reap the benefits that are due them.


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I. BASIC FACTS ON THE COCONUT INDUSTRY

The coconut industry traces its roots to the 17th century. Since the

Spanish Colonial period, the industry had been a cheap source of oils for

world trade. Under Spanish Colonial rule selected villages were required

to plant coconut trees, the purpose of which was to supply the galleon

trade. Then again under American rule coconut oil was stockpiled as a

source of glycerine for the First World War.

After the declaration of Philippine independence government

intervention in the industry was nowhere found until shortly before Martial

rule and largely during Ferdinand Marcos’ dictatorship. Common to all

these government interventions was the exploitation of the coconut

industry and its farmers. In fact, much of the events that transpired under

Martial Rule had influenced the state of the coconut industry. A coconut

monopoly that exists until today was set up with the use of taxes and

levies.

The following facts reflect a long-time state of the coconut industry:

A) THE EXPORT-ORIENTED INDUSTRY IS A MAJOR CONTRIBUTOR TO THE NATIONAL ECONOMY.

The coconut industry substantially contributes to the country’s yearly

income. This is why the industry is often referred to as a “dollar earner

and export winner”. Up to the present, 80% of raw materials coming

from coconuts are exported and the remaining 20% are processed

domestically.

Export earnings from coconut usually fall within the top-three or top-

five dollar earners. It currently ranks fifth in overall merchandize export


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receipts2. But more importantly, the export earnings from coconuts

require no import cost unlike that of other dollar earners.

Exported traditional coconut products, coco chemicals and other non-

traditional products generate a gross average of US$ 690.5 million per

year (2000-2004). The biggest earning yet was registered in 1996 at

US$ 1 billion. Coconut products and by-products reached 114 country

destinations in 2004.

B) THE EXPORT EARNINGS ARE LARGELY LIMITED TO TRADITIONAL PRODUCTS AND BY-PRODUCTS SUCH AS COCONUT OIL (CNO) AND COPRA.

Most of the earnings merely come from export of traditional coconut

products and by-products such as copra, copra meal, coconut oil and

desiccated coconut.

Total Revenue 2004USD 841 M

Coconut Oil, 67.30%

Desiccated Coconut, 11.70%

Others, 9.70%

Oleochem, 5.70%

Copra Meal, 3.60%

Copra, 2.00%

Source: Philippine Coconut Authority


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Coconut oil rakes in the larger part of the income. Coconut oil usually

captures close to 60 - 65% of the world market. However, the

increased coconut production in other countries and growing

competition from other lauric oils pose serious threats. Malaysia is

trying to penetrate the world market by introducing oil palm plantations

in different countries, the Philippines included.

Of the more than two million metric tons coconut production of the

country, 91% is processed into copra while the other 9% is used for

desiccated coconut, coconut cream, nata de coco, virgin coconut oil,

and bukayo. Practically all copra is crushed and largely exported as

crude oil. Cochin oil, semi-refined oil and edible oil (RBD) compose but

a small part of the exported coconut oil.

In the international market coconut oil competes with sixteen (16) other

oils and fats led by soybean, palm kernel oil, rapeseed, sunflower seed

and cottonseed oil. Palm kernel oil (PKO) is the closest competitor.

Just like coconut oil it also contains lauric fatty acid that is not present

in any other oil. There lies only a small difference in the short chain

and long chain fatty acids but practically interchangeable in almost all

uses. PKO can normally demand a lower price than coconut oil in

international trade because the oil palm can produce more quantities

than coconuts when compared on a hectare to hectare basis. Thus

making coconut oil a high-end lauric oil. This is precisely the reason

why even the Philippines imports certain quantities of PKO.

Table 1. Philippine Exports of Coconut Oil (CNO)

YEAR VOLUME (MT)

VALUE (Million US$)

PRICE (US$/MT)

2000 1,036,922 464.562 448 2001 1,417,975 417.549 294 2002 944,662 352.625 373 2003 1,184,105 504.860 426 2004 959,151 577.790 602



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The potential for non-traditional products from coconuts (activated

carbon, coco chemicals, virgin coco oil, geotextiles, nutriceuticals) is

immense but the Philippines produces so little of these as of present.

Table 2. Export of Non-Traditional Coco By-products 2003 2004

Commodity Volume (MT)

Value (USD FOB)

Volume (MT)

Value (USD FOB)

Glycerine 11,948 12,165,653 15,683 12,589,237 Alkanolamide 3,833 4,111,798 3,560 3,909,901 Acid Oil 513 233,893 250 167,784 Fresh Coconuts 846 215,336 3,254 669,145 Nata de Coco 5,903 4,684,132 7,509 5,421,704 Ubod 1 704 2 2,460 Coco Flour 394 223,693 816 511,393 Coco Milk Powder 1,003 2,638,958 1,140 2,856,708 Liquid Coco Milk 1,956 2,340,486 2,056 2,722,311 Makapuno 1,200 2,500,656 930 1,842,998 Bukayo 0 43 - - Frozen Coco Meat 200 308,308 235 379,611 Coconut Chips 1,000 1,167,358 513 646,655 Coco Jam 34 27,749 39 35,837 Coco Water (liters) 617,343 463,289 427,085 293,115 Coco Water Concentrate 5 31,239 10 22,078

Coco Liquor 9 8,825 - - Coconut Vinegar 220 170,149 226 196,119 Coir Fiber 896 537,474 5,260 1,181,718 Coir Fiber Waste 2,037 225,160 1,619 217,822 Coconut Husk 480 12,000 - - Coco Shell Powder 44 7,500 - - Shampoo 626 2,488,860 1,275 3,578,663 Toilet/Bath Soap 2,194 6,168,496 1,636 5,298,925 Laundry Soap 188 114,369 8 25,284 Paring Oil 17 27,850 26 11,050 Margarine - - 2 3,774 Virgin Coconut Oil - - 177 553,469 Coco Handicrafts Unspecified 1,650,550 Unspecified 1,621,456 TOTAL VALUE 42,524,528 44,759,217


Geotextiles are synthetic permeable textile materials used with soil,

rock, or any other geotechnical engineering related material. Also

known as geosynthetics, geotextiles are generally associated with

high-standard, all-season roads but can also be used in low-standard

logging roads. Geotextiles are highly effective in preventing soil

erosion.


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Nutriceuticals is a term used for a mix of food and medicinal values

which coconut oil derivatives best exemplify. The medium-chain

monoglyceride (MCM), a derivative of coconut oil, has a broad range of

anti-microbial properties which is potentially effective for the treatment

of a variety of ailments including the capacity to prevent the assembly

of HIV particles.

C) THE COUNTRY’S COCONUT PRODUCTION IS DECLINING.

Coconut production peaked in 1976, 1986 and 1995. All the other

years saw decreased production. At present the average productivity

has gone down drastically to 38 – 40 nuts per tree / year (840 kg/ha

copra equivalent) from the ideal 75 nuts per tree / year.

Mindanao’s share was formerly pegged at 52% of the total coconut

production. Today it has risen to almost 60% -- not because of

increased production in the south but rather due to the steadily

decreasing production in the Visayas and Luzon areas where senile

trees abound. Estimates show that of the more than three million

hectares devoted to coconuts, there are 750,000 hectares planted to

senile trees and 490,000 hectares to nutrient deficient trees.

It is the unstable trend in production coupled with fluctuating world

market prices that lead others to view the industry as a sunset industry

-- that which will eventually die down and cease to bring income to

those who depend on it.

The Philippine Coconut Authority reports that coconut production in

2004 reached 2.4 Million Metric Tons, an eight percent (8%) decline

from the previous year’s output. “Best farm yield” is pegged at 2.5 tons

per hectare but the existing average yield per hectare is at 0.8 ton.


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Table 3. Philippine Coconut Production

Year Production (in ‘000 MT, Copra Terms)

1985 – 1989 Ave. 2,204 1990 – 1994 Ave. 2,280 1995 – 1999 Ave. 2,212

2000 2,544 2001 2,828 2002 2,308 2003 2,631 2004 2,410

2005/f 2,354 /f Forecast


If rehabilitation is not done at the soonest moment the industry’s end-

users (mills and processing units) will stand to lose drastically from its

operations.

Table 4. RP Processing Capacity

NO. OF MILLS ANNUAL CAPACITY Oil milling 73 4.990 Million MT Copra Refining 46 1.593 Million MT RB/RBD Oil Desiccated Coconut 10 132,709 MT DCN product Oleochemicals 7 150,000 MT CNO throughput


It should be further noted that a big part of the industrial segment is

composed of companies established with the use of coconut levy funds

during the Marcos dictatorship. The CIIF Oil Mills (LegOil, Granex,

CagOil, SPMC, SOLCOM) is the biggest oil milling group in the

country. Its combined copra crushing capacity is 40% of the country’s

total copra production. Cocochem, the oleochemical plant in Batangas,

was also set up by the coco levy funds.

D) COCO LANDS IN THE COUNTRY ARE SHRINKING DUE TO COCONUT TREE CUTTING AND LAND CONVERSION.

Coco Lands are known to comprise almost a third of the whole

Philippine agricultural area at 3.2 million hectares. Coco lands are

spread in more than 68 of the 79 provinces in the country. Joey T. Faustino EPRA Paper/ Executive Director Coconut Industry Reform Movement, Inc.

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However, available statistics show that the country’s share for total

world hectare for coconut has gone down from 28.3% in 1988 to 25.5%

in 1993. Indonesia, on the other hand, upped its share from 24% in

1988 to 26.3% in 1993. Today Indonesia leads over the Philippines in

coconut production but applies an exact opposite marketing strategy,

20% export and 80% local use – the only reason why the Philippines

remains to be the lead exporter of coconuts.

Massive coconut tree cutting and land conversion have drastically

reduced the coconut lands. While there is no specific data on how

much of the coconut lands have been subject to conversion, one may

get a rough idea from regional industrial centers set up by government

such as the CALABARZON and the Cagayan-Iligan Corridor -- most

areas were highly devoted to coconuts but are now industrial parks

and world-class golf courses.

In the meantime, a 1996 PCA report cited the ratio of replanting vis-à-

vis cutting is 1:23. This figure was based only with the monitored

cutting permits issued by the Authority in the implementation of R.A.

8048, The Coconut Preservation Act of 1995.

E) SMALL COCONUT FARMERS AND FARM WORKERS HAVE BEEN THE LIFE AND BLOOD OF THE INDUSTRY BUT PERISH FROM IT.

There are some 3.4 million coconut farmers and farm workers (1.5

million farmers and 1.9 million farm workers). Along with their families,

they constitute more than 20 million people -- directly and indirectly

dependent on the coconut industry.


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Coco Farmers / Farm workers Population Close to a third of the Filipino population is directly and indirectly dependent

on the coconut industry. Coconut Farmers / Farm Workers

Ave. Members per Family

Total Total Filipino Population

Percent

3.4 M (1.5 / 1.9) 6 20.4 M 84 M 24.2

The coconut farmers (small owners and tenants) and the farm workers

constitute 92% of the coconut industry’s workforce. This workforce

directly depends on coconut farming for income. The rest are spread

in the manufacturing sector which include oil milling, refining,

desiccating and other coconut–related enterprises.

Socio-Economic

Structure in the Coconut Industry The Coconut Farmers and Farm Workers constitute more than 90% of the industry’s workforce. Wage Farm

Workers Tenant Farmers Small Owner

Farmers Traders / Industrial Workers

Landlords

52% 24% 16% 4% 4% 92% 8%

Source: Philippine Peasant Institute

For decades these farmers and farm workers labored and tilled the

coconut farms that delivered the goods to government coffers and

business individuals, accounting for over 40% of the value of

agricultural exports.

However, they have remained gravely marginalized. Studies in 1999

show that a farmer who relies on copra production alone gets some

P10,000 annually (with copra priced at P17 – P18 per kilo) from a

hectare. Computed on a daily basis, a small coco farmer earns some

P25 - P30 for a family of six. A majority of the small farmers do depend

on copra alone. Statistics show that 2.1 million hectares of the more

than 3 million hectares planted to coconut are not intercropped.


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Present Smallholder Family Income per Year (Owner operated at constant late 1998 prices)

Coconut Farmers and Farm workers earn not more than P30 per day. Farm size Family Income Pesos per hectare 2 hectares P21,920 P10,960

Source: World Bank / Treecrops for Rural Development

Generally copra goes through a long chain of traders before it reaches

the oil mill. These traders serve as the informal financiers of farmers in

the rural areas. Traders offer cash advances to the farmers for day-to-

day needs in between the quarterly harvests in exchange for an

assured copra supply. Merely 26% of the real value of copra is offered

at the farm gates by these traders. More over, the usual practice of

traders is to deduct Php1.50 per kilo copra on the given price3.

F) PERENNIAL PROBLEMS PLAGUE THE INDUSTRY: GOVERNMENT’S PERSPECTIVE.

Based on the previous facts, the coconut industry is beset by serious

problems. These problems are not new. They have been deliberated

on since the last couple of decades.

Usually government and the business leaders view these problems in

the following manner:

Low Farm Productivity. The average farm production per hectare

per year is only less than one metric ton. Government claims that two

to three metric tons per year per hectare is possible through proper

agricultural technology, hybridization and fertilization. The following

reasons were identified to contribute to low productivity:

1. Twenty-five percent (25%) of coconut bearing trees are senile

or over sixty (60) years,


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2. More than ninety-eight (98%) of total land planted is planted to

talls which bear fruits after seven (7) years and yield

approximately one-half (1/2) that of hybrids,

3. Absence of fertilizer application especially in nutritionally

deficient coconut land,

4. Improper harvesting and post-harvest practices resulting in

poor copra quality, and,

5. Inadequate intercropping in coconut lands (less than 40% of

coconut farmers practice intercropping).

Low Farmgate Price. Past administrations (prior to 1992) cite the

fluctuating world market prices as the main culprit for low farm gate

prices. It was only recently that the problem was viewed as the result

of the many layers of middlemen, expensive transport and handling

cost and cartelized pricing from coconut processors / exporters.

Low Utilization Value of the Coconut. Oil, by far, is the only product

of value from the coconut. Most parts are considered wastes with the

exception of the shell that is used as fuel in the process of drying

coconut meat for copra production.

Lack of Infrastructure Support. There is need for some building

facilities, feeder roads and irrigation support to coconut farmers.

Funds are needed for these.

Lack of Research and Development. Basically due to a lack in

funds, aggressive research and development has stayed in the

backseat. The bulk of the coconut products are exported in practically

raw form as crude coconut oil, copra meal, copra, desiccated coconut

and young coconuts.


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Past administrations saw no need to diversify as products and by-

products from coconuts in its raw form delivered the income. Recently

due to the serious competition of lauric and vegetable oils in the world

market government is slowly realizing the need for the production of

non-traditional products and by-products from coconuts.

There are existing researches in the Philippine coconut authority. But

somehow the researches serve more the industrial sector than the

primary producers.

Lack of Funds. For decades government has allocated limited funds

to develop the coconut industry due to lack of financial resources and

the ever-growing domestic budget deficit. The same reason prompted

the collection of coconut levies during the Marcos Dictatorship. The

huge collection from the coconut levies, however, benefited only the

few privileged individuals close to the dictator.

Until today, the coco levies are subject to various cases filed in the

Supreme Court and the Sandiganbayan. Coconut-related corporations

established with the use of the levies were put under sequestration

after the fall of the dictatorship. As of today certain coco levy related

cases have been decided on by the Courts.

Poverty of the coconut farmers. About 90% of coconut farmers and

farm workers live below poverty line -- such a huge irony considering

the industry’s contribution to the country’s economy.

Both government and industry leaders have centered on low productivity as the main barrier to the industry’s development. Low productivity is tantamount to low income. Standard solutions,

therefore, are being applied such as fertilization, replanting programs


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and reproduction of hybrid varieties to achieve greater yield – the

greater copra yield, the higher income for the country.

In line with this the Philippine Coconut Authority had undertaken the

Small Coconut Farmers Development Program (SCFDP) in 1996, a

fertilization project funded by the World Bank with US $121.8 million.

The project terminated just recently. PCA reports show that the use of

chemical fertilizers do increase coconut yield after constant application

in a certain period of years.

The private sector -- mostly big landlords, manufacturers, processors

and exporters -- share similar views and depend on government as

well to put a solution to the problems as they normally did during the

Marcos era. During that time there was no clear distinction among the

two.

As to the farmers’ poverty, livelihood projects are the only solution. But

time and again the coconut farmers were branded as “non-bankable”

and could not easily avail of loans from neither rural banks nor the

United Coconut Planters Bank itself, which was set up with the use of

the coco levy funds and mandated to “solve the perennial credit

problems of the coconut farmers”.

G) THE SMALL COCONUT FARMERS AND FARM WORKERS SUFFER FROM FAR MORE SERIOUS STRUCTURAL PROBLEMS OTHER THAN THOSE CONSIDERED BY GOVERNMENT. To the millions of small coconut farmers and farm workers there are

more serious problems that plague the industry and cause misery to

their lives.


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Land Problems. The basic lack of control and ownership of the land

bring about their continuing poverty. Low productivity and income may

be seen to emanate from this structural problem as well.

Tied up with an onerous sharing of the fruits of the land and their labor,

small coconut farmers hardly find an incentive to develop the land they

till. Any extra income generated will be hardly be theirs anyway.

Despite the inclusion of coconut lands in the Comprehensive Agrarian

Reform Law (RA 6657) in 1988, a great majority of the 3.4 million small

coconut farmers and farm workers do not have control or ownership of

the land they till.

RA 6657 also mandates the abolition of agricultural share tenancy in

coconut lands. The agricultural leasehold should be applied instead.

The leasehold system allows the tenant / tiller to pay the landowner a

fixed rent at a ratio of 75:25 in favor of the farmer. This had been

hardly implemented as well for various reasons.

The Department of Agrarian Reform recognizes its biggest Land

Acquisition and Distribution balance to be coconut landholdings (750 T

hectares). In the past, these landholdings were merely categorized as

“problematic areas” and were, therefore, never prioritized for

distribution. During the incumbency of Secretary Horacio Morales in

DAR, other modes of acquisition such as the “Corporative” and the

“Market Assisted Land Reform” schemes sprouted. However, strong

apprehensions were raised against these schemes for they were

largely viewed to favor the big landlords and businesspeople rather

than the farmers themselves. It was also during this time that Eduardo

“Danding” Cojuangco Jr. was proclaimed as “Godfather of Agrarian

Reform.”


19

In 1998 CARP was extended for another ten years through the

enactment of R.A. 8532. This extension, however, was not prioritized

during deliberations of the yearly General Appropriations Act.

Congress centered on a provision which provides that all ill-gotten

wealth recovered by government shall go to CARP. Soon the

Department of Agrarian Reform found itself operating solely using

some Php 30 billion recovered from the Marcoses. Without any other

budget allocation for the Agrarian Reform Fund (ARF) from Congress

the amount was utilized largely for the administrative needs of the

department. A portion of this fund got entangled as well to the alleged

Fertilizer Fund Scam that occurred briefly before the 2004 presidential

elections.

Monopoly in the Industry. During the Marcos Regime, a coconut

monopoly was set up primarily using coco levy fund collections.

From trading to hauling, processing and milling, marketing and export -

- all these were run by a few privileged business interests identified

with Marcos.

Today even with Marcos gone, the monopoly still has a stranglehold on

the industry. Traders feast on hapless farmers who are never left with

any choice but to follow their dictated prices on copra. With a long line

of traders to end-users and exporters, the poor producer, the small

farmer is virtually left with only a small percentage of the real income.

Even with the sequestration of the Coconut Industry Investment Fund

(CIIF) Oil Mills and other enterprises funded by the coco levy, the

group of companies continues its hold on the trading of principal

coconut products for domestic and foreign markets as if they were


20

private entities. In 2001 the CIIF Oil Mills amassed a gross profit of

P900 million while copra prices at the farm gate plummeted to an all-

time low of P2.50 to P3.00 per kilo during the last quarter4.

The monopoly can easily pass on the burden of any shift in the market

to the farmers.

Limited Participation in Policy and Decision-making Processes.

Considering the massive number of small coconut farmers and farm

workers, participation and representation in coconut-related agencies

is very limited.

During the Marcos Regime, the Coconut Producers Federation

(COCOFED) was the only government-recognized national

organization of coconut farmers. This “farmer” organization though

was led and controlled solely by big landlords and businesspeople.

COCOFED was made a regular member of the board of PCA. And so

with all the other coco-related institutions. COCOFED officials formed

part of the interlocking directorate that monopolized the industry and

figured in the huge coco levy controversy.

Under the Aquino Administration the PCA organized the National

Federation of Small Coconut Farmers Organizations (NFSCFO). The

federation became the conduit for the distribution of free chemical

fertilizers from the WB-funded Project. During that time, PCA related

only to farmer-members of the NFSCFO. Other legitimate farmers

were ostracized by PCA officials.

During the Ramos Administration representatives of the farmers were

given token representation in some of the coco-related agencies.

Three board members of COIR were appointed to the boards of the


21

United Coconut Planters Bank (1) and the Philippine Coconut Authority

(2).

Upon the assumption of Estrada as President, representation reverted

to zero. The two small farmer representatives in PCA were replaced

with COCOFED officers.

Coconut farmers started to gain substantial access to policy-making

bodies upon the assumption of President Arroyo. The Supreme Court

decision of December 14, 2001 practically gave way to such an

opportunity. With the PCGG gaining inherent voting rights to the

sequestered coco levy funded companies, then PCGG Chair Haydee

Yorac moved to appoint some thirty (30) farmer representatives and

coco levy recovery advocates in the boards of the UCPB-CIIF Group of

Companies. The appointments, though, were politically driven rather

than institutional. Thus, representation changes as soon as political

considerations shift. When Haydee Yorac left the PCGG policies

regarding the coco levy cases reversed. Such is the case at present

where farmer-directors not inclined to compromise with Cojuangco

were booted out of the boards and replaced with appointees beholden

to Cojuangco.

Foreign market control and disadvantageous international trade

policies. Foreign market control is established by stipulations (copra:

sanitary and phytosanitary measures, CNO: transport/storage) set by

other countries to protect their own produce from potential competition

or to simply be able to have command of price rates. It may also be

manifested by the anti-tropical oils campaigns to discredit competition

e.g. American Soybean Association smear campaign on coconut oil.

The latest moveby the U.S., effective January 1, 2006, is to subject


22

tropical oils to food labeling regulations and categorized with saturated

animal fats.

Government analysts conclude that the coconut industry will benefit

from the GATT-WTO due to the lifting of subsidies particularly on lauric

/ vegetable oils in other countries. But certain quarters believe

otherwise. Import duty on Philippine coco nut oil to China is 10% as

against 5% for Indonesian coconut oil. India imposes a 42% duty on

coconut oil.

The removal of tariff barriers (Asean Free Trade Area) may

disadvantage coconut oil in the local market since it is more expensive

than palm oil. More over, the existing internal problems of the industry

will render the country less competitive with that of other lauric oil

producers. The GATT-WTO is as well expected to further burden the

industry on a domestic scale. In July 1987, President Aquino issued

EO 259 requiring the progressive use of cocochemicals as

components of soaps, shampoos and detergents in order to increase

local demand for coconut oil. GATT-WTO had rendered this issuance

useless to allow free entry of other lauric oils into the domestic market.

Worse, there are apprehensions that patents to certain coconut

processing technologies developed here in the country have been

applied for by foreigners. Thus when the principle of Intellectual

Property Rights is applied, the country cannot benefit as much as it

can from the technologies we, ourselves, have developed from our

very own resources.

II. INDUSTRY & FARMER DEVELOPMENT INITIATIVES OF

GOVERNMENT


23

Since the coconut industry is one of the major industries supporting the

national economy, it is the State’s concern to make it a strong and secure

source not only of the livelihood of a significant segment of the population

but also of export earnings, the sustained growth of which is one of the

imperatives of economic stability.5

By the sheer degree to which the coconut industry affects the national

economy government ought to be greatly concerned with the development

of the industry and its workforce. Government intervention, though, must

be strategically positioned in order to make the industry sustainable.

During martial rule the Cojuangco-led monopoly coined the so called

“Vertical and Horizontal Integration” of the coconut industry. The concept

was to expand upstream and downstream industries and corner the

international market of coconut oil. Laws were codified to fuse together

government and business initiatives to ensure copra supply, processing

and marketing. While the presidential decrees were supposedly aimed at

developing the industry and uplifting the conditions of the coconut farmers,

the vertical and horizontal integration simply manifested into a giant

monopoly. It was actually the fruits of the industry that was vertically and

horizontally integrated into the hands of a few cronies.

This period set in motion the political trend in interventions by

government in the industry. Succeeding administrations based its actions

primarily on gaining control of the coconut monopoly from Cojuangco and

his associates. The Estrada Administration, on the other hand, handed it

back to Cojuangco on a silver platter. All the time minimal interventions

were carried out such as organizing the SCFOs (Aquino period),


24

fertilization project (Ramos period), and the small farms development

project (Estrada period).

Upon the assumption of President Arroyo, after the ouster of Estrada,

the appointed farmer-directors in the boards of the UCPB-CIIF Group of

Companies pushed for the Direct Copra Marketing scheme as an

immediate response to the needs of the coconut farmers. Soon enough

the UCPB and CIIF Oil Mills boards resolved to provide some Php 700

million for initial programs to help the coconut farmers. Malacañang took

the cue and President Arroyo announced that government shall allocate

the funds to provide micro-finance and direct copra marketing services for

the coconut farmers6.

Table 5. Malacañang press release on Php 700 M fund allocation BENEFICIARIES ALLOCATION

PROGRAM TARGET INDIVIDUAL PROGRAM INDIVIDUAL

Buklod-Unlad Program (BUKO)

Women in coco households

18,000 100M 5,555.55

MaTuTuPad Lending Program

Organized coco farmer groups / Coops

30,000 300M 10,000.00

Farm Diversification Program

Individual farmers 60,000 200M

3,333.33

Direct Copra Marketing Cooperatives 56,000 100M 1,785.71

TOTAL 164,000 700M

P 4,268.29 / beneficiary

In real terms, the allocation of P700 million essentially allowed the

implementation of two basic programs for coconut farmers by the UCPB-

CIIF Group of Companies: Microlending (Php 400 M) and Direct Copra

Marketing (Php 300 M). The programs were designed to be merely initial

but immediate. The total amount was small compared to the general

needs of the lot of coconut farmers but the mere situation of government

engaging in coconut farmer programs was a welcome note for most coco Joey T. Faustino EPRA Paper/ Executive Director Coconut Industry Reform Movement, Inc.

25

farmer groups. A certain section of the coco farmers, the Pambansang

Koalisyon ng mga Magsasaka at Manggagawa sa Niyugan (PKSMMN),

opposed the Php 700 M release and instead suggested that an amicable

settlement be made with Cojuangco on the CIIF- San Miguel Corporation

block in order to generate bigger funds7.

The Coconut Industry Reform Movement, Inc. in 2004 undertook initial

studies on the impact of both micro-finance and direct copra marketing

programs:

1. Micro-finance

Microlending is the major activity of Coco Finance, a subsidiary of the UCPB which had been assigned to cover up UCPB’s inability to perform its mandate8. Coco Finance is governed by existing rules of the Bangko Sentral ng Pilipinas (Central Bank of the Philippines). It functions, therefore, like the small bank that it is – subject to limitations as per BSP rulings – with profits as a major consideration for continued existence. Coco Finance’s operations are nothing different to other microlending institutions such as the Quedancor and the Philippine Credit and Finance Corporation. The only perceived difference is the concentration on coconut farmers as a clientele. The nature of the institution itself, therefore, limits it from catering to the lot of other needs of the coconut farmers. The Grameen for women had already been tested by Coco Finance even before the allocation of P100 million / P700 million was made. So confident was the company’s management on the project since the experience in Sogod, Leyte reflected a rate of 100% repayment. The records of Coco Finance may indeed reflect such figure. However, where the group of women sourced out the funds for repayment is not quite established. Payments made have not been determined to have come from income earned out of the project or merely borrowed from another source. In addition, this project dedicated for the women in coconut communities, ironically, has a built-in provision requiring a husband’s consent. The biggest allocation under Coco Finance’s microlending program is currently with the MaTuTuPad Program – P300 million of the P700 million initial fund release of UCPB and the CIIF Oil Mills in 2002. MaTuTuPad is an acronym for “Magsasaka Tungo sa Tunay na Pag-unlad”, as if to imply that microlending is indeed “the solution” towards farmers’ real development. The issue is not exactly the name attached to the program but delves more on a perception of policy-makers on the role of microfinancing programs for the coconut farmers. Ka Oscar Santos, a former board member of the UCPB during the Ramos Administration, fought a lone battle to bring about the creation of the Coco Finance in 1994. Ka Oca was again called on by the President to serve as board member of Coco Finance in 2002. In 2004 he tendered his resignation as board member of Coco Finance citing the following:


26

On the matter of utilization. Ours is basically loan programs. We encourage the farmers to borrow but require them to pay what they borrowed plus interest. The question is: are our loan programs working? We were furnished copy of Cocofinance Balance Sheet as of April 30, 2004. Note that as of April 30, 2004, year to date, Cocofinance has: P181 M loan receivables P819 M IMA investments P54 M deposits in banks P30 M total interest income P7 M interest income on loans P16 M total expenses P9 M net income

From a layman’s point of view, these figures could only mean that: For the year which ended April 30, 2004, Cocofinance has loaned out only P181 M out of its P871 M loanable funds (P52 M bank deposits plus P819 M IMA). The figures indicate that availment is too slow either because of any or all of the following: Many coco farmers cannot accept why they have to pay interest on loans

from the funds they painfully contributed to. They do not find our loan programs attractive, despite our roadshows

and publicity. They find difficulty complying with our requirements. They find our interest rates high. They may be willing to pay interest but not at present rates and terms. They shy away from loans, scared of their inability to repay.

Then too, loan facilities similar to ours are also being extended by other competing agencies like the Landbank and Quedancor. Chances are we are covering the same areas already being served by them. Loan not suited for the really poor. Grant of loans will not necessarily benefit the farmer. It could even prove to be a burden as may be indicated in the increase in our volume of past due loans. (p. 2, BSP Report of Examination as of May 31, 2003). Thus, we found it necessary to engage the services of collection lawyers to recover unpaid loans. UCPB Director Royandoyan affirms that loans may work well for “rich farmers” but not to the really poor borrowers, the vast majority of whom usually find themselves sunk in debt unable to return borrowed money plus interest. For them, other forms of meaningful assistance should be thought of, not loans. Perhaps the following basic points would be of some help if and when our existing programs are reviewed: The coconut farmers themselves should be allowed to determine

how best the levy funds taken from them should be utilized. They would surely know what they need better than we do.


27

The coco producing provinces are not similarly situated. That being so, each province would vary in how best to utilize its share of the levy funds for its constituents.

Second look. Review of our programs has become even more necessary especially since some P2B SMC dividends may soon be made available. Our programs to help uplift the coco farmers, were not intended to be inflexible. Adjustments or even changes may be made if they do not serve the purpose for which they were conceived, namely, to assist and benefit meaningfully as many coco farmers as possible with the least possible expense. The key word is meaningfully.

Obviously Ka Oca was coming from a direction of wanting to be able to impact the impoverished lives of the coconut farmers other than just providing microfinancing. The arm of Coco Finance is tied up with such a limitation. After almost two years of operations for the MaTuTuPad Program with the expansion of staff and vehicles for the program (meaning more administrative expenses), Coco Finance has rolled out P100 million of the P300 million allocation. The company might practically be earning more from the unutilized funds (P819 Investment Management Account handled by the UCPB Trust Department) which earn 8-9 % interest annually than with interest coming from loan receivables to the farmer cooperatives. The issue at hand does not necessarily put to question the performance of Coco Finance or whether or not to expand its loan packages. Coco Finance or the UCPB – CIIF Finance and Development Corporation has a “twin company” – the UCPB – CIIF Foundation. Both companies have the same board of directors, officers and staff. This company, like any other foundation set up by a private business entity, would have far more flexibility in choosing its socio-civic programs and activities that would qualify the UCPB – CIIF Group of Companies to avail of tax exemptions. The Foundation has diminutive resources compared to that of Coco Finance. The Board of Directors meets more often as the Coco Finance than as the Foundation. Necessarily it follows that operations and staffing also reflect the same condition. The Foundation has had a history of conducting programs such as “Piso kada araw” and a reforestation project. The “Piso kada araw” Project was intended to generate funds to build coconut nurseries. There is only one reported taker of the project, the Pangasinan State College. It has had a string of relief operations and medical missions: Pangasinan and Pampanga (1995) with contributions from LEGOIL and COCOLIFE; North Cotabato and Maguindanao (1997) with the assistance of UCPB branches in Cotabato and Kidapawan; South Cotabato (1998) with the UCPB Marbel Branch; Pangasinan – Pampanga – Cainta – Marikina (1999) with the support of UCPB Rural Bank and UCPB Savings Bank; North Cotabato & Antipolo City (2000); and, Batangas (2001). A major undertaking of the Foundation was its Reforestation Project that earned it two recognition awards. The Foundation recently accepted the top Asia Corporate Responsibility Award during an Annual Asian Forum in Kuala Lumpur, Malaysia. While the feat is definitely laudable from the environmental point of view, it would also be worthwhile to site that the project does not in any way relate to the industry and the farmers – the reforestation was done in Antipolo, Rizal.


28

Today, the Foundation extends financial assistance to PCA for a survey of coconut farmers, the acquisition of books and bookshelves for an elementary school in a coconut community, and offers a scholarship program for children of coconut farmers. Scholarships were also offered on caregiver courses. The Foundation also recently launched its UCPB-CIIF GOVERNS program, the UCPB-CIIF Groups Employee-Volunteer Initiatives. The program encourages the Group’s employees to volunteer their services for organizational capability-building of coco farmers: Accounting & Bookkeeping; Financial Analysis & Management; Enterprise Development & Management; Organizational Diagnosis & Development; Strategic Development Planning; etc. However, the technology and mechanism to be used to pass on the skills to the farmers is not quite clear. The situation clearly shows a gap in prioritization of the UCPB and its subsidiaries which should, in the first place, cater to the coconut farmers as mandated by the coco levy collections. If microfinancing is to be perceived as only one among the various needs of the coconut farmers, then it would be logical to maximize the elbow room the Foundation can provide and expand its services on projects that would meaningfully serve the farmers and their communities. Especially considering that the subsidiaries are offsprings of UCPB, the parent company that owes its roots to the coconut farmers themselves via the coconut levy. Thus Ka Oca Santos, in his same letter of resignation, offered other sensible alternatives:

Part of the funds may perhaps be allotted to any, some, or all of the following as our resources would allow: seriously pursue the MOU with China where the latter proposes to

extend a loan of US100M worth of machineries and equipment to process coco husks rotting in the countryside, payable by export value of geotextile and other processed coco products. This is significant since coco farmers nationwide stand to benefit.

initiate and pursue similar arrangements. consider funding Philhealth programs for the coco farmers. fund more scholarship arrangements similar to that arranged by

Director Lim. promote production and marketing of such coco products as

biodeisel, virgin oil, coco husks, coir etc. support continuing research on the curative qualities of monolaurin.

2. Direct Copra Marketing

Conceptually, Direct Copra Marketing (farm-to-mill) offers a good vehicle to rid the coconut farmers of indebtedness to the traders and assure them of optimizing the actual price of copra. This scheme is not entirely new to the CIIF Oil Mills. A limited number of cooperatives have availed of this program through the PCA and the CIIF Oil Mills during the Ramos Administration. The only difference under the current administration is the extra effort of the Oil Mills to expand the, so called, DCM sites in line with the President’s response to the clamor of coconut farmer groups and the persistent nagging of the farmer-directors.


29

Old-timers in the Mills would simply refer to DCM sites as Copra Buying Stations. In fact, the Chief Buying Officer of the Mills once addressed a group of farmers and said, “give us three people to train for the buying station and I assure you that by the time they finish the training, they will no more think like farmers – but traders.” The statement does reflect the confidence of the officer in passing such trading skills to the farmer groups. However, it also puts in a tinge of resentment when perceived in an angle that coconut farming and trading are totally unrelated and irreconcilable skills. The statement, to some degree, is closely reflective of the way the DCM sites are operating. The Oil Mills, under the leadership of Arroyo appointees, initiated some sixteen (16) DCM sites in 2002. It did not take long enough for the number to expand to sixty (60) and seventy (70). Now in order to manage the growing number of DCM sites, the board (including farmer-directors) and management of the Mills established the Niyog Trading Center, Inc. (NTC). The NTC is a new and separate entity tasked and organized to manage nut / copra / other products buying operations by the CIIF Oil Mills. Available documents on the NTC concept express the intent of the Mills to later on divest its shares to the farmers. The move appears to be addressing the question: What then after direct copra marketing? The NTC reflects the integrated processing scheme where other value-added products such as coco coir fiber and coco shell is processed alongside the traditional copra. DCM sites are viewed to graduate into integrated processing sites in the near future. The Mills, through the NTC, shall buy whole nuts instead of simply copra. The big question so far is how to go about pricing the whole nut. Previous board meetings of the CIIF Mills discussed the possibility of offering the price range of P2 to P3 per nut. Apart from the buying capacity of the Mills, there is no concrete basis presented as of yet to coconut farmer groups. Copra currently sells at more than P20 per kilo. It takes three to four nuts to make a kilo of copra. So based on the current price of copra alone, a nut should be able to garner a price of at least P5 each – even when the decreased cost of labor and drying is inputted. The nut simply just has to command a higher price than that of copra for its mere added market potentials. Better yet, to foster a clearer and more directional discussion on the NTC scheme, the performance and impact of the existing DCM sites be thoroughly assessed and reviewed first. As of June 1, 2004 the Niyog Trading Center, Inc. reported the following:

74 operational DCM nationwide with membership of 29,850 farmers. Latest weekly delivery of copra is 300 to 400 MT / YTD delivery is 4,954

MT. Another 60 more coops / scfos already trained for DCM. Number of DCM site is set for 200 by the end of the year.

Easily a series of questions will come to mind considering the data reported by the NTC, Inc.:

How many of the operational DCM sites are profiting / losing? What factors lead to profits / losses? How many are strategically located with or without the presence of

competing buyers / private mills?


30

What level should be reached in terms of copra volume and number of DCM sites in order for the Mills to sustain or profit from DCM?

What are the concrete advantages and disadvantages of coconut farmers (coop members and non-members) from DCM?

These and other relevant questions should be substantially answered before a DCM site can graduate into an NTC site. Without a thorough study on the impact DCM is creating on the coconut farmers, only the perceived practices will come into fore. So far, some grassroots level feedback point to the following:

1. There is no strict uniformity and / or compliance in the implementation of the DCM scheme. Apart from the regular business-related differential (i.e. transport assistance, cash advance requirements, storage facility assistance), some DCM sites differ in privileges. One coop in the Visayas is accorded with a typewriter that hardly functions while another coop in Mindanao is accorded a fax machine.

2. DCMs were conceptually designed to be a partnership between the CIIF Oil Mills and the farmer coops. There exists no MoA or MoU explicitly stating the responsibilities of both parties for all the 70 or so DCM sites.

3. Managers and staff trained for DCM functions not under the authority of the “partner” coops but directly under the authority of the Oil Mills.

4. PCA was made part of the screening and accreditation of candidate farmer cooperatives for DCM implementation. In some areas the PCA officials would only cater to farmers who have been organized by the agency under the Small Coco Farmers Organization (SCFO). Non-SCFO members but are as well bonafide coconut farmer organizations have a hard time getting the accreditation.

5. When prices of copra drops, the DCM coops may not take a position on whether to trade or not – a great advantage that traders can practice.

6. A number of DCM staff has been offered the retailership of Minola Cooking Oil on an individual basis.

Putting together the available feedback, in the absence of a thorough study, would indeed lead to a conclusion that the DCMs are treated merely as extension arms / buying stations of the Oil Mills rather than a “program for the coconut farmers.” The deduction may not be far-fetched when one considers that the Oil Mills face economic and, to a certain extent, political limitations. Commonly like other business entities, the target of the Oil Mills is to profit from its operations – whether it profits out of efficient processing and world market trading or merely out of exploiting the coconut farmers. The presence of farmer-directors may have affected the latter to a certain degree. What remains to be evident, though, is the fact that the Mills would still have to deal more with the traders rather than with the farmers and their DCM sites in order to get the volume of copra needed to sustain its operations. Based on the data provided by the NTC, Inc., the current volume of copra delivered by the DCMs hardly counts. It does provide additional volume but not


31

substantial. With the existing average of the more than 70 DCM sites, even granting that the target of 200 DCMs is established by year-end, the copra volume will still be microscopic compared to the volume a single trader can actually deliver. The Oil Mills today is said to be operating only at 35% - 40% of its capacity. Ergo, it would be more practical to deal with a few traders delivering a huge amount of copra volume rather than with a great number of DCMs that deliver a small volume. In short, the farmer coops still have yet to prove to the Oil Mills the economic power they can muster before they can expect to get certain privileges enjoyed by the traders. On the political side, the controversial CIIF Oil Mills is one of the biggest subjects of the coco levy cases pending in the courts. During the Marcos Dictatorship the companies was under the control of Danding Cojuangco as a monopoly where traders rule. After the fall of the dictatorship subsequent administrations took over the sequestered UCPB-CIIF Companies and ran it mainly for profits and profit-sharing. Cojuangco came back during the short-lived Estrada presidency and once again ruled it just like it was part his private oil mills (POMs). The system, therefore, of having to serve the interests of the coconut farmers had never been practiced – this and the other companies within the group had never been ran mainly for the farmers’ interests. While under sequestration the company’s leadership and workforce only react to the changing wishes of administration after administration.9

At present the micro-finance (MaTuTuPad) program of Coco Finance

had been slowed down due to an increase in past due accounts, currently

at 28%. The vision and mission of the company had also been revised to

attune it with the 10-point agenda of the Arroyo Administration.

As of January 2006 there are 168 direct copra marketing sites being

operated by the CIIF Oil Mills. Eighty percent (80%) of the DCMs are

positioned in twelve provinces in Mindanao where the supply of copra is

most abundant. The DCMs are under the sponsorship of LegOil in Davao,

CagOil in Cagayan and Granex in Iligan. The CIIF Oil Mills report that 55%

of the operated DCMs are experiencing losses while a substantial part of

the remaining percentage is on the “watch list.” This has driven the

company to undertake an organizational diagnosis of the farmer

cooperatives operating the DCM sites.

The move of the CIIF Oil Mills is not only for the purpose of evaluating

the DCM scheme. The Mills are currently getting ready to launch another


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program with an integrated feature, the CIIF Coco Farm Development

Program.

The CIIF Coco Farm Development Program

This newly-hatched program of the CIIF Oil Mills primarily takes into

account the business of oil milling but is open as to how to benefit the

industry’s workforce for a sustainable industry. It also considers the fact

that coconut farmers cannot live on mere copra production and would

eventually have to enter into semi-processing and processing of other by-

products from coconuts. The scheme is affected by the potentials in the

international market for nutriceuticals, geotextiles and biofuel.

The program targets 1.3 million hectares of coconut lands from 2006 to

2010 and plans to feed the oil mills with the much-needed copra supply.

Prioritization: Basis installed and planned capacity of CIIF Oil Mills INSTALLED INSTALLED/YR PLANNED/D PLANNED/YR SOLCOM Mulanay

100 MTD

34MTY

200MTD

68MTY

LEGOIL Arimbay

350MTD

119MTY

600MTD

204MTY

LEGOIL Davao

700MTD

238MTY

800MTD

272MTY

CAGOIL Cagayan De Oro

450MTD

153MTY

650MTD

221MTY

GRANEX Iligan

950MTD

232MTY

1,200MTD

408MTY

TOTAL

867MTY

Components: 1. Planting, Replanting and Fertilization 2. Strategic Crop Intercropping 3. Harvesting/Copra processing 4. Coconut By-Product Processing

Parties involved:


33

For existing Farms 1. CIIF Oil Mills Group 2. Local Government Units 3. Farmers Organizations/Individual Partners 4. National Government Agencies/PCA

For New Farmers

1. CIIF Oil Mills Group 2. Local Government Units 3. Department of Environment and Natural Resources 4. Farmers Organizations

Outcomes:

1. Planting and Intercropping / Contribution to 1.3 hectares Agribusiness lands 2. Planting and Replanting/ Increasing in copra production 3. Intercropping and by product processing/ increasing in income

The CIIF Oil Mills want to assist coconut farmer cooperatives to

capture a steady supply of copra to operate its mills in maximum capacity,

thus increasing its profits as against overhead costs. It takes 17 to 24

hours to start up an oil mill and costs the oil mill P3.5 million overhead. If

utilized under its maximum capacity the overhead cost alone would eat up

profits.

So just like any other business the main motive of CIIF Oil Mills is to

maximize profit. However, considering that the program intends to involve

coconut farmer cooperatives, the companies may be well into the path of

establishing its “corporate social responsibility (CSR)” – something that

had not been done in the past.

When prices of copra dropped to its lowest levels at the farm gates in

2001 (Php3 – Php 3.50 per kilo), the CIIF Oil Mills then assured itself of

P900 million gross profits while the UCPB-owned trading company in

France (UCPI) profited more. On the other end, most of the small coconut

farmers stopped harvesting copra because at such a low price the cost of

labor (farm worker) would even exceed the income from selling the

harvested copra. Some landowners and farmers even decided to sell the

coconut trees as lumber getting as much as P500 – P700 per tree.


34

It was not only the farmers then who were at a losing end. If the trend

goes on, especially considering that 45% of the country’s coconut trees

are less productive or senile, the CIIF Oil Mills with a combined crushing

capacity of 40% of the country’s total copra production would not be able

to operate profitably in the coming years. Business will not be sustainable.

The decision of management to undertake such a program, therefore,

is timely and opportune for both the coconut farmers and the companies.

For whom the companies profit is another matter altogether even as the

CIIF Oil Mills had been declared by the Sandiganbayan (May 7, 2004) to

be owned by government in trust for all the coconut farmers. This is tied

up with policies of the ruling government.

The CIIF Coco Farm Development Program intends to put in place all

the four components:

a) Planting, replanting and fertilization

This program component aims to address the perennial problem

of declining copra production from 750,000 hectares of senile

trees and 490,000 hectares nutrient deficient. CIIF estimates a

cost of Php 12,000 per hectare. Danny Coronacion, CIIF Oil

Mills President, explains further that organic fertilizers (from

coco peat) can be utilized. PCA, through a Memorandum of

Understanding is assisting CIIF in identifying the areas to be

covered.

b) Strategic Crop Intercropping

The only intercrop the CIIF Oil Mills can profit from would be

other sources of biofuel that can be combined with coco methyl


35

ester (CME) – NOT agricultural crops. As of present the choice

intercrop for CIIF is jatropha (a.k.a. tuba-tuba, makasla). CIIF

shall offer assistance to the farmers in planting jatropha. CIIF

shall also take care of harvesting and processing. Other crops

for intercropping, Coronacion says, should be handled by the

Department of Agriculture.

c) Harvesting / Copra processing

Harvesting and copra processing shall be fully managed by

CIIF. This is to ensure a uniform copra quality (free of aflatoxin

and other phytosanitary considerations) to avoid rejection or

discounting in the international market. These considerations

presently chop off a large amount from the country’s export

earnings in copra and coconut oil trade. Coconut farmers and

farm workers shall be hired for such purpose.

The formula for pricing, therefore, will be based on the nut and

not just copra alone (existing copra prices + cost of husk + cost

of shell + cost of water).

d) Coconut by-product processing

CIIF plans to establish small processing centers for other

coconut by-products (husk, shell, water). The centers are

estimated to take in coconuts from a radius of 2,000 hectares.

Like the previous concept of Nut Trading Center (NTC) it

considers the importance of having an integrated approach to

development. But unlike the previous NTC concept where CIIF

merely intended to dictate the price of nuts, the new plan is to


36

set up profit-sharing schemes with coconut farmer cooperatives.

CIIF will be in charge of marketing.

The CIIF Oil Mills expect to achieve the results through cooperation

agreements with the farmer cooperatives and/or local government units.

Members shall be made to pledge their coconuts (per tree) to the

cooperative that in turn pledges it to CIIF. As an addition, CIIF is seriously

contemplating on providing for other loans needed by the coop members.

In short, CIIF is taking on the role of the traders. And in order to effect the

program, CIIF considers tapping the CIIF-SMC cash dividends of P1

billion per year.

The matter on the cash dividends of the CIIF-SMC block is, in itself, a

very tricky and sensitive issue and may have legal implications as well. If

government is allowed to utilize the CIIF-SMC shares for such a purpose,

it might trigger the Cojuangco camp to utilize the other portion (ECJ-

managed) contested in court. Unfortunately, the farmers cannot rely on

the current PCGG to make a logical and legal study on the matter.

Somehow the steps to be made should be weighed with the maximum

benefits of the coconut farmers and the industry as the end in view and

based on the current developments in the coco levy recovery front.

III. THE COCO LEVY CONTROVERSY

Admittedly the virtual source of resources needed to develop the

coconut industry had been locked in for a long period in the coconut levy

controversy. More than two hundred civil and criminal cases, with 72

different respondents, have been filed by government in lieu of the efforts

to recover the huge wealth from Eduardo Cojuangco, Jr. and his

associates.


37

The huge sum now runs over a hundred billion pesos worth of assets

and shares in companies where the coco levies were invested. Not only

are the companies important as a potential source of huge funds for

government but also because portions of the investments were in coconut

related firms that has a stronghold on the coconut industry.

Understanding the coco levy controversy, therefore, is an integral part

of any analysis that is to be made regarding the coconut industry.

A) THE CONTESTED COCONUT LEVY FUND ORIGINATED FROM THE COCONUT CONSUMERS STABILIZATION FUND (CCSF)

From 1973 - 1982, under the Marcos dictatorship, a coconut levy

was imposed via Presidential Decree 276 as amended. P.D. 276

states that, “a levy, initially, of P15 per 100 kilograms of copra

resecada or its equivalent in other coconut products, shall be imposed

on every first sale,” effective August 20, 1973. This levy, called the

Coconut Consumer Stabilization Fund (CCSF), was initially intended to

subsidize domestic consumption of coconut-based commodities

premised on a crisis brought about by an abnormally high price in the

world market for fats and oils.

However, through succeeding presidential decrees, the original

purpose was soon amended to cover “investments for coconut

farmers” (Coconut Industry Investment Fund) and “development of the

industry” (Coconut Industry Development Fund). Later on the

investments were made to appear as “private” funds even though it

was exacted from the millions of coconut farmers.


38

The CCSF levy which started at the rate of Php 15 ballooned to as

large as Php 100 per 100 kilos of copra during the nine-year period,

depending largely on its export price, or Php 60 on the average. Total

collections without any receipts reached Php 9.695 billion.

The CCSF is the “bone to pick and casus belli” coconut levy fund

drawn from the “blood, sweat and tears” of the million and a half small

coconut farmers through an elaborate series of Marcos laws, decrees

and orders reputedly inspired by the ACCRA Law Office of Edgardo

Angara, Raul Roco, Franklin Drilon, et al.10 The burden was

shouldered by the small coconut farmers for the coco levy was

deducted from the usual price of the copra they sell in accordance with

the levy rates.

The CCSF is separate and distinct from that of R.A. 6260, the

Cocofund Levy, which ruled that a levy amounting to P0.55/100 k

copra was to be collected on every first sale. This levy was collected

for purposes of putting up capitalization for the Coconut Investment

Company – to be owned, capitalized and administered by the coconut

people. The amount was to be collected for a period of ten years or

until the amount of P100 million is reached. Cocofund receipts were

issued for this purpose.

Features CCSF

(1973 – 1982) Coco Fund Levy

(1971 – 1981) Amount of automatic deduction from copra prices

Ave: Php 60/100k On the first sale

Php 0.55/100k On the first sale

Total collection P 9.695 B P 100 M Purpose Subsidy, CIDF, CIIF CIC Proof of payment / receipt None except receipts

issued by PCA to the millers upon remittance

Coco Fund Receipts issued to the copra producer


39

B) UTILIZATION OF THE CCSF

The CCSF was managed by four institutions that ruled the coconut

industry at the time: United Coconut Planters Bank (UCPB), Philippine

Coconut Authority (PCA), Philippine Coconut Producers Federation

(COCOFED) and the United Coconut Oil Mills (UNICOM). In 1986,

after the fall of the Marcos dictatorship, PCA Chief Oscar Santos

moved to have the UCPB and the CCSF audited. It took the audit team

two months to account for the total collection. 1986 COA Report

Purpose Amount % 4,753,321,845.13 49.03 1) Coconut Industry

Investment Fund (CIIF) 2,572,143,884.69 26.53

2) Insurance Fund 994,941,396.29 10.26 3) Debt Service Fund 38,970,509.40 0.40

UCPB

4) Coconut Industry Development Fund (CIDF)

1,147,176,054.75 11.83

2,818,167,904.31 29.07 1) Subsidy 2,147,207,603.38 22.15 2) PCA Research &

Development 242,892,132.30 2.51

3) Premium Duty 173,142,231.78 1.79 4) Additional Equity on UCPB 80,864,000.00 0.83 5) Fertilizer Distribution

Program 52,521,977.03 0.54

6) Donation to Children’s Hospital

50,000,000.00 0.52

7) Ang Tahanang Maharlika 40,000,000.00 0.4 8) Acquisition Price of

Controlling Equity Interest 28,880,000.00 0.30

PCA

9) Hagemaier Aqueous Coconut Processing Project

2,659,959.82 0.03

905,528,789.29 9.34 1) Dist’n of Stock Cert of

UCPB to Coco Farmers 694,833.81 0.01

2) Copra Price Stabilization Fund (CPSF)

144,922,064.14 1.49

COCOFED

3) Development and Socio-Economic Projects for Coconut Farmers

759,911,891.34 7.84

1,218,511,210.94 12.57 1) Census Committee 3 23,000,000.00 0.24 2) Coconut Industry

Rationalization Fund (UNICOM -Administered)

1,189,735,210.94 12.27

Others

3) Subscription Deposit (Per PCA and COA Report)

5,776,000.00 0.06

Total 100


40

Other findings were not necessarily in the interest of the coconut

farmers and the industry:

Other Expenditures Amount

Coconut Palace Php 40,000,000 Miss Universe Contest, World Chess Championship atbp 545,000 Helicopter 7,550,000 Bugsuk Hybrid Farm 900,000,000 UNICOM Damages (Anti-Trust)* 184,000,000

C) UCPB, THE CIDF AND THE CIIF

The establishment of UCPB was made possible also through a

Marcos presidential decree. Pursuant to PD 755, Mr. Eduardo

Cojuangco, as director of the PCA Board, negotiated the purchase of

the First United Bank (FUB) of Don Jose Cojuangco. The bank was

bought using the coconut levy funds and was renamed United Coconut

Planters Bank (UCPB) with Mr. Eduardo Cojuangco Jr. as its

President. The UCPB acted as the financing arm entrusted with almost

half of levy funds mainly consisting of the the Coconut Industry

Development Fund (CIDF) and the Coconut Industry Investment Fund

(CIIF), both coming from the mother CCSF. In effect, farmers’ money

was deposited to UCPB interest free.

Census Fund P0.03 B

Debt Service P0.04 B

InsuranceP0.99 B

CIDF(Replanting)

P1.15 B

CIIFP2.57 B

Non-UCPB(PCA, Cocofed,

atbp.)P 4.919 B

CCSF Total: Php 9.695 Billion Administered by: - UCPB P 4.776 B - Non-UCPB P 4.919 B


41

The mandated purpose of the presidential decree was to provide

“permanent solution to the perennial credit problems of the coconut

farmers” (PD 755). However, actual utilization of the funds revealed

otherwise.

PD 582: The Coconut Industry Development Fund (CIDF)

In the name of development, a contract was executed between

Cojuangco, as UCPB President and Administrator of the coco levy

fund, and himself, as owner of the Agricultural Investment Inc. (A.I.I.) --

a small company then capitalized with only P100 T -- for the delivery of

100 5

nut

he contract stipulated that upon signing, P500 M shall be

B stops

buying during the 5-year period, UCPB will be penalized to pay the

ent

B in the

million hybrid coconut seedlings to PCA/UCPB for a period of

years costing some P980 M from the coco levy fund. The coco

seedlings were to be distributed to coconut farmers for free.

T

advanced to A.I.I., interest free, and that in the event that UCP

ire contracted amount as if everything was delivered.

After over three years, with barely 16 million seedlings delivered,

UCPB indicated that it could no longer continue buying and as so

stipulated, UCPB was penalized to pay the balance of the contracted

amount. Records show that over P 1.2 billion coco levy funds were

sunk into the Bugsuk Seed Garden Project of Cojuangco.

In 2005 a remaining balance of the CIDF was traced in UCP

amount of Php 127 million.

PD 414: The Coconut Industry Investment Fund (CIIF)


42

Utilizing the CIIF, UCPB was primarily responsible for the

acquisition of assets and corporations that paved the way for the

eventual monopoly of the coconut industry. UCPB was made

administrator of the CIIF by presidential decree as all collections from

the CCSF were to be deposited to the bank of “the coconu

t farmers”.

FIRMS B

OUGHT WITH THE CIIF

Name of Firm Amount Unit ) 864 M ed Coconut Chemicals Inc. (UNICHEMUnite 147 M d Coconut Planters International (UCPI) OIL MILLS:

United Coconut Oil Mills (UNICOM) 544 M Granexport Mfg. Corp. 246 M Leg pi Oil Company 210 M asSan Pablo Manufacturing Corp. 43 M

Iligan Ba y Express Corporation (Shipping) 9 MUnited C oconut Planters Life Assurance Corp. (COCOLIFE) 16 MUnited Cocoa Plantation, Inc. 90 M United Coconut Planters Management, Inc. 10 M COPRA TRADING COMPANIES:

Mt. Bulusan Agricultural Commodities, Inc. 10 M Lamitan Peak Agricultural Commodities, Inc. 10 M Mt. Boribing Agricultural Commodities, Inc. 10 M Sharp Peak Agricultural Commodities, Inc. 10 M Mt. Tuayan Agricultural Commodities, Inc. 10 M Lam Bay Agricultural Commodities, Inc. 10 M onMactan Agricultural Commodities, Inc. 10 M Maopay Agricultural Commodities, Inc. 10 M Malipayon Agricultura Inc. l Commodities, 10 M

ADDITIONAL SIX TRADING FIRMS Davao Coconut Planters Trading, Inc. 34 M Zamboanga Coconut Planters Trading, Inc. 25 M Leyte Coconut Planters Trading, Inc. 17 M Visayan Coconut Planters Trading, Inc. 12 M Bicol Coconut Planters Trading, Inc. 25 M

Source: COA rt 1986 Repo

This gave way to yet another conglomerate, the United Coconut Oil

OM served well the purposes of those who

a whole. Marcos later issued an

NICOM to export coconut oil. In

e granted sole rights to th

to import petrochemical materials for use

Mills (UNICOM). UNIC

managed it but not the industry as

Executive Order allowing only U11

1983, another Presidential Decre e

Cojuangco-owned UNICHEM

in its products.


43

The acquisitions made by UCPB consolidated the coco

monopoly from hauling, transport and shipping, m ,

marketing and international trading.

D)

n

hrough

ading Companies, which are in turn owned by the CIIF

Oil Mills, which are owned by UCPB.

to acquire these the five CIIF Oil

Mills obtained a loan from UCPB in the amount of Php 976 million. Out

quity stock of the 14

Holding Companies. The remaining Php 729 million was farmed out as

loa

a loan directly from

UCPB in the amount of Php 680

mil

t

nut

illing and processing

SAN MIGUEL CORPORATION AND THE CIIF

Acquisitions did not stop at completing the coconut monopoly. I

1983 the CIIF found its way into the San Miguel Corporation t

the 14 Holding Companies. The 14 Holding Companies are owned by

the 10 Copra Tr

The Soriano Group in SMC decided to sell their 33,133,266 shares

at Php 50 per share in 1983. In order

of the loan Php 276 million was invested in the e

n to the Holding Companies.

Having its own capital

structure from the CIIF Oil Mills,

the 14 Holding Companies

secured

lion. Thus, availing

themselves of a total of Php

1.656 billion – the exact amoun

of the SMC shares for sale.

Notably a number of the


44

corporate names of the 14 Holding Companies were patterned after

the initials of senior partners of the Angara, Concepcion, Cruz, Rega

Abello (ACCRA) Law Firm.

la,

Drilon

ranklin M. Drilon and Raul S. Roco admitted their involvement in

the have

of

C shares were purchased by 44 companies

throug PB and

the CIIF Oil MIlls. The

companies are closely related

of the SMC shares.

12

14 Holding Companies ACCRA Senior Partners

Anglo Ventures Corporation Avelino V. Cruz Randy Allied Ventures Rogelio A. Vinluan Te Deum Resources Teodoro D. Regala

Rock Steel Resources Raul S. Roco First Meridian Development Franklin M.

F

sale of the 33.1 million shares of SMC in 1983 but claimed to

no personal knowledge of and involvement in any of the transactions

the said companies13.

Yet another block of SM

h a loan from UCCIIF Oil Mills UCPB

Lo

to Eduardo Cojuangco, Jr. who

consequently was handed its

voting trust agreement for 18% 44

Companies

an Lo

Silver-leaf PlantatiMeadow-Lark Plantations, Inc.

an

ons, Inc.

Primavera Farms, Inc.Black Stallion Ranch, Inc.

Balete Ranch, Inc.Christensen Plantation Co. As a result, Cojuangco had

majority control of SMC and

was, therefore, elected as

Chairman in 1983.

18% SMC shares(ECJ-SMC Block)


45

E)

verned UCPB, PCA,

COCOFED and the UNICOM. The interlocking directorate was

implicitly provided for in the various presidential decrees that Marcos

issued in the process of integrating the industry.

THE INTERLOCKING DIRECTORATE

THE INTERLOCKING DIRECTORATE Decisions and business transactions were easily undertaken

through an interlocking directorate that go

PCA COCOFED UCPB UNICOM

Enrile

Cojuangco

LobregatEleazar

Concepcion

Enrile(1975)

dela Cuesta(1978)

Enrile

Lobregat

Enrile

C

Chairperson

President ojuangco

LobregatEleazarla Cuesta

Concepcion

BoD dela Cuesta deCojuangcoEleazarLobregat

All the other companies acquired with the use of the CIIF had the

same people as Board of Directors and officers. Cojuangco was

everywhere in the coconut scene. Cojuangco, as the sole end-user

UNICOM, remitted the levy collected from the farmers to PCA where

he was Director of the Board. The money collected by PCA was

deposited to UCPB where Cojuangco was President and Administrator

of the coco levies. UCPB, in turn, utilized the funds for investment and

evelopment in SMC, UNICOM, UCPB’s commercial banking, Bugsuk

Seed Garden and other business ventures where Cojuangco is head

or p

d

resident.


46

Under the control of Cojuangco, aided by the interlocking

directorate and “legally” backed by the Marcos presidential decrees,

public funds (levies and taxes) were transformed into private fund

Such was the revelation of the Commission on Audit Report of 1986.

Upon inspection of the stockholders’ list, it was discovered that 77.9%

of UCPB’s equity was named to only eleven (11) persons and entities,

the bulk of which were named to the ECJ Group. UCPB, being the

mother or par

s.

ent company, substantially owns the CIIF Group.

77.9% UCPB Equity

UCPB Stockholder No. of Shares Eduardo M. Cojuangco Jr. 54,000,000+ Balete Ranch Inc. (ECJ) Group 14,000,000+ Christensen Plantation Co. (ECJ) Group 9,000,000+ ECJ & Sons Agri-Enterprises 54,000,000+ Jesus M. Pineda, Jr. (ECJ Group) 37,000,000+ Narciso M. Pineda (ECJ Group) 37,000,000+ Danilo Ursua (ECJ Group) 37,000,000+ Kabangkalan Sugar (ECJ Group) 700,000+ ACCRA Investments Corp. 14,000,000+ JAKA Investments (Enrile) 7,000,000+ Ma. Clara Lobregat 2,000,000+

Source: 1986 COA Report

F) LEV MONOPOLY TO

but copra prices in the farm gates

did not change at all. To placate the coconut farmers, Marcos and

Cojuangco shifted the legal obligation to pay the levy from the coconut

farm exporters. However, Marcos and Cojuangco

kne that the market structure passed on the economic

burden of paying the tax back to the farmers.

nut

farmers and the general public. In 1976, P.D. 961 worded the levy “to

com

IES SUSPENDED AS THE OK OVER

The levy was eventually “lifted”

ers to the millers and

w and saw to it 14

Marcos tried to cloak the coco levy from the ire of the coco

e from copra exporters, oil millers, dessicators, and other end-

users of copra.”


47

In 1980, due to growing protest from the coconut farmers, he

issued P.D. 1699 suspending the levy with respect to millers and

desiccators but continued the collection with respect to exporters.

e

nited Coconut oil Mills (UNICOM).15

coconut farmers. This so-called “end-users” merely shifted back the

eco e

o the traders at

less than 25% ensuring the cartel of net profits of more than 75% of

the

G)

eposited in Swiss banks, the assets

bought with the coco levies remained intact in the country except for

tho

However, the same PD imposed a substitute levy to continue th

government’s “developmental projects.” Collected from 17 June 1980

to 09 September 1981, the money collected was used for “price

supports” to the U

This did not, in any way, change the situation. The coconut

monopoly was simply in place and it practically had the power to

dictate the domestic prices of copra to the utter prejudice of the

nomic burden of the levy to the coconut farmers who were paid th

copra price with levy deducted.

The poor coconut farmers were selling their copra t

world market price.

STATUS OF THE CIIF

Unlike in the case of the Marcos ill-gotten wealth which was

funneled out of the country and d

se that had been dissolved or declared insolvent. These are what

the PCGG intends to recover.


48

The assets invested in by the more than Php 2 billion (CIIF) have

gro he wn enormously through the years. The estimated amount of t

investment today runs over Php 100 billion.

Investments Original Estimated Equity

(December 2004) Oil M Php 733 M Php 34,800 M illing Companies, 10 CTCs, SubsidiariesOleoch 864 M 2,400 M emicals (Cocochem) Trading Company (UCPI-France) 148 M 1,050 M Insurance Company (Cocolife) 16 M 1,500 M Barging Company (IBEC) 9 M 20 M Others (DissolUnicComp

ved Companies-1985-1990) om, Cacao Plantation, Management

any

802 M 0

UCP 1,100 M B/CIIF Finance 0 Combined 2,572 M Php 40,870 M

Equity at Traded Value of CIIF-SMC Block Php 59,870 M

k is ith

that of the CIIF Oil Mills.

tions several of the companies within the

lished its own subsidiaries. The subsidiaries, as well, form

s.

Sub

Note that the CIIF-SMC bloc included w the UCPB-CIIF

Group as ownership is

During the course of opera

Group estab

an integra he coco leviel part of t

sidiary Parent % Ownership Equity (December 2004)

GranJersey

Php 250 M ex USA (New )

Granexport Mfg. Co. 100%

Minola Corp. San Pablo Mfg. Co. 100% 47 M Silahis Mktg. Co. Minola Corp. 100% 34 M

A look into the SMC shares that were bought with coco levy funds

show the biggest value of assets to be recovered. The San Miguel

Corporation shares practically serve as the “crown jewels” in the effort

the coco le

Miguel Cm th ount

to recover vies.

San orporation Shares

fro e Coco Levy Am

CIIF Block Php 50 B (min.) ECJ Block 37 B (min.)

Total Php 87 B (min.)


49

H) ST

es were spread in the Supreme Court and

the Sandiganbayan, the anti-graft court. The numerous cases were

based on eight main arguments that are re n the civil cases filed

in the Sandiganbayan.

CIVIL CASE NO. 0033-A irst United Coconut,

now United Coconut Planters Bank (UCPB)

n

ermenegildo C. Zayco, the purchase by the

Philippine Coconut Authority (PCA) of 72.2% of the outstanding

ited Bank (FUB), which was

of the Coconut

onsumers Stabilization Fund (CCSF) being initially in the

us

d

ATUS OF COCO LEVY RELATED CASES

Since 1987 a barrage of court cases was filed against Cojuangco

and his associates. The cas

flected i

Re: Anomalous purchase and use of F

Defendant Eduardo M. Cojuangco, Jr. manipulated, beginning

the year 1975, with the active collaboration of defendants Jua

Ponce Enrile, Ma. Clara Lobregat, Danilo Ursua, Jose R.

Eleazar, Jr. and H

capital stock of the First Un

subsequently converted into a universal bank named United

Coconut Planters Bank (UCPB) through the use

C

amount of P 85,773,100.00 in a manner contrary to law and the

specific purposes for which said coconut levy funds were

imposed and collected under P.D. No. 276, under anomalo

and sinister designs and circumstances.

CIVIL CASE NO. 0033-B RE: Creation of companies out of coco levy funds

Defendant Eduardo M. Cojuangco, Jr. created and/or funde

with the use of coconut levy funds, various corporations, such


50

as the Philippine Coconut Producers Federation, Inc.

(COCOFED), Coconut Investment Company (CIC), COCOFED

arketing Corporation (COCOMARK), and the United Coconut

rporation (COCOLIFE), with the

ts

cluding Juan Ponce Enrile, Ma. Clara Lobregat, Jose Eleazar,

ropriated

ash

nd

of

try

ment Funds (CIDF) levy funds deposited with the

ational Industry Development Corporation (NIDC) as

aid funds and later with UCPB, of

aintenance of Bugsuk Island Seed Garden (“Bugsuk”) with

A of

M

Planters Life Insurance Co

active collaboration and participation of other defendan

in

Jr., Iñaki Mendezona, Danilo Ursua and Hermenegildo Zayco,

most of whom comprised the interlocking officers and directors

of said companies; dissipated, misused and/or misapp

a substantial part of said coconut levy funds and allotted to

themselves excessive salaries, allowances, bonuses and other

emoluments for their own personal benefit, including huge c

advances in millions of pesos which remain unliquidated a

accounted for, to the prejudice of plaintiff and the Filipino

people.

CIVIL CASE NO. 0033-C Re: Creation and operation of Bugsuk Project and awardP 988 million damages to Agricultural Investors, Inc.

Defendant Eduardo M. Cojuangco, Jr. misappropriated,

misused and dissipated P 840 million of the Coconut Indus

Develop

N

administrator – trustee of s

which said defendant was Chief Executive Officer in connection

with the (i) development, improvement, operation and

m

Agricultural Investors, Inc. (“AII”) as developer. Note: Both

Bugsuk and AII are beneficially held and controlled by

defendant Eduardo M. Cojuangco, Jr.; (ii) sale by AII to PC


51

the seednuts produced at Bugsuk at exorbitant prices, a

payment of liquidated damages in the amount of P

640,856,878.67 and arbitration fees of P 150,000,000.00

pursuant to a decision rendered by a Board of Arbitrati

against UCPB for alleged breach of contract.

CIVIL CASE NO. 0033-D Re: Disadvantageous purchases and settlement of the accounts of oil mills out of coco levy fund

Defendant Eduardo M. Cojuangco, Jr. established and cau

to be funded with coconut levy funds, with the active

collaboration of defendants Ferdinand E. Marc

nd (iii)

on

sed

os through the

suance of LOI926, and of defendants Juan Ponce Enrile, Jose

obregat, Jose C. Concepcion, Iñaki

lma and Rolando

e la Cuesta, the United Coconut Oil Mills, Inc. (UNICOM), a

/or non-

nd

st

nd

is

R. Eleazar, Jr. Ma. Clara L

Mendezona, Douglas Lu Ym and Teodoro D. Regala,

Emmanuel Almeda, Eduardo Escueta, Leo Pa

d

corporation basically held and controlled by defendant Eduardo

M. Cojuangco, Jr., and bought sixteen competing and

operating oil mills at exorbitant prices of copra and other

coconut products, and assumed and paid the outstanding loan

obligations of seven of those purchased oil mills, in the total

amount of P805.984 million with the express consent a

approval of defendant Ferdinand E. Marcos, thereby

establishing a coconut monopoly for their own benefit and unju

enrichment to the grave damage of plaintiff and the Filipino

people.

Defendant Eduardo M. Cojuangco, Jr. manipulated, with the

active collaboration of defendants Mohammad Ali Dimaporo a


52

Teodoro D. Regala, the sale of the Mindanao Coconut Oil M

(MINCOCO) to UNICOM through the assistance of LO

defendant Ferdinand E. Marcos, in violation of the Guaranty

Agreement dated July 23, 1976, which prohibited the sale,

among o

ills

I by

thers, of the MINCOCO assets/properties without the

rior written consent of NIDC, under terms and conditions

y,

s to

levy

of pesos in order to pay damages adjudged against

NICOM, headed and controlled by said defendant, in an anti-

.

nt Eduardo M. Cojuangco, Jr. misused, dissipated and

nlawfully disbursed coconut levy funds with the active

p

grossly disadvantageous to plaintiff and the Filipino people.

Defendant Eduardo M. Cojuangco, Jr. drew up a scheme of

payment to settle the accounts of MINCOCO and other

UNICOM-acquired mills with their respective creditors, namel

the National Investment Development Corporation (NIDC),

development Bank of the Philippines (DBP), and the Philippine

Veterans Bank (PVB), under terms grossly disadvantageou

plaintiff.

CIVIL CASE NO. 0033-E Re: Unlawful disbursements and dissipation of cocofunds. Defendant Eduardo M. Cojuangco, Jr. misappropriated and

dissipated the coconut levy funds by withdrawing therefrom tens

of millions

U

trust suit in California, USA

Defenda

u

collaboration and participation of defendants Maria Clara

Lobregat, Juan Ponce Enrile, Jose Eleazar, Jr., Rolando de la

Cuesta and Hermenegildo Zayco for projects of defendant


53

Imelda R. Marcos, and for purposes completely alien to those

for which the fund was created, among which are the various

onations made by PCA such as the amount of P400,000.00

.00 for

ultural

of

y

vy

f

in the Philippines.

epsi

d

and P10 million for the social services and health and medical

assistance projects of Mrs. Imelda R. Marcos; P125,000

the yearly Malacañang Pasko project; P10 million to the C

center of the Philippines; P5 million to the Philippine Youth

Health and Special Center; P50 million for the construction

the Tahanang Maharlika building and P6 million to COCOFED;

and those donations made by UCPB of P10,0000.00 to the

Manila International Film Festival; P10 million to the UP Facult

Development Fund; P50,000.00 to the Manila Symphony

Foundation, Inc.; a parcel of land located in Baguio City to the

University of Life and “other similar unlawful disbursements”,

which remain unaccounted for to date.

CIVIL CASE NO. 0033-F Re: Acquisition of San Miguel Corporation. Defendant Eduardo M. Cojuangco, Jr. misused coconut le

funds to buy out to majority of the outstanding shares of stock o

San Miguel Corporation in order to control the largest agri-

business, food and beverage company

CIVIL CASE NO. 0033-G Re: Acquisition of Pepsi Cola. Defendant Eduardo M. Cojuangco, Jr. misused coconut levy

funds, with the active collaboration of defendants Ernesto O.

Escaler and Ernest Escaler, to buy out the local partner of P


54

Cola, to implement his scheme to monopolize the softdrinks

., Don Ferry, Alicia Ll. Reyes

of the Board of Governors of

redit privileges from the DBP in the

.00 for the use and benefit

f the Northern Cement Corporation, a corporation beneficially

e

angco, Jr. under terms and conditions grossly

isadvantageous to DBP, plaintiff and the Filipino people.

ctober

0

nd

industry. CIVIL CASE NO. 0033-H Re: Behest loans and contracts. Defendant Eduardo M. Cojuangco, Jr. obtained from the DBP in

or about 1981, with the active collaboration of defendants Cesar

C. Zalamca, Jose R. Tengco, Jr

and Rolando M. Zosa, all members

the DBP, huge loans and c

aggregate amount of P 603,343,470

o

held and controlled by dependent Eduardo M. Cojuangco, Jr.,

despite manifestly inadequate collaterals and under terms and

conditions grossly disadvantageous to the DBP, plaintiff and th

Filipino people.

Defendant Eduardo M. Cojuangco, Jr. obtained, with the active

collaboration of defendant Antonio Carag, the plant,

machineries and facilities of Alpha Integrated Textile Mills, Inc.,

a DBP-foreclosed asset, in favor of Southern Textile Mills, Inc.,

a corporation beneficially held and controlled by defendant

Eduardo M. Coju

d

Defendant Eduardo M. Cojuangco, Jr. obtained, in O

1981, with the active collaboration of defendants Manuel

“Manda” Elizalde, Jr., Jose Aspiras, Jose M. Guerrero and

Bernardo M. Vergara, loans and credits in the amount of P 7

million from the Philippine Tourism Authority in favor of the

Holiday Village Philippines, Inc., and Coral Island Resort aJoey T. Faustino EPRA Paper/ Executive Director Coconut Industry Reform Movement, Inc.

55

Development Corporation, a corporation beneficially held and

D.

ge

The

entere

of the

passed ourts on

just the nature of the coco levy funds. While other cases are still

pending until today, certain major cases have seen favorable

resolution.

1. he December 14, 2001 Supreme Court decision

of

ave

re favorable and explicit interpretation of the coconut

rmers’ battle to recover the multi-billion coco levy funded assets.

e resolution of

three (3) major civil cases pending in the Sandiganbayan, the anti-

graft Court: Civil Case Nos. 0033 – A, B and F.

controlled by defendants Manuel “Manda” Elizalde, Jr., Jose

Aspiras, and Eduardo M. Cojuangco, Jr., to finance a villa

resort complex at San Juan, Batangas, which never

materialized.

civil cases reflect the anomalous transactions made and

d into by Cojuangco and his associates. The matter of the nature

coconut levies were left to the Supreme Court. Fifteen years

before a conclusive decision was rendered by the C

A closer look into the actual decisions and notations by the Courts

would confirm that what used to be mere “advocacy lines” are now

considered as standard legal parlance in regards to the coco levy-

related cases.

T

The Supreme Court decision of 14 December 2001 (Republic

the Philippines versus Cocofed, et. al., G.R. Nos. 147062-64) g

way to a mo

fa

The legal implications of the decision directly affect th


56

Compared to the SC decision of October 2, 1989 – “the coco

levy funds are clearly affected with public interest” – the 2001

decision clearly identifies the nature of the coconut levies as prima

facie public. The Court, expressing the intent “to be more

categorical,” made the following specific assertions:

a. That the voting rights to the sequestered (coco levy funded)

ssets rest lawfully with the Philippine Commission on Good

urpose

c. That the burden of proof to show that they are private funds lies

d.

following the SC decision.

ote that the SC did not rule on the actual ownership issue but was

exp

corpor vy

funds or private funds from Cojuangco et. al. is a question of fact that

fall

howev mer

groups y representing the farmers.

a

Government and not with those appearing in the stockholders’

list;

b. That the coco levy funds were collected for a specific p

for which it should be utilized;

with Cojuangco, Cocofed et.al. and not government; and,

That the Sandiganbayan shall determine “true ownership” of the

sequestered (coco levy funded) assets within 6 months

N

licit on the issue of who has the rightful voting rights to the

ations. Whether the said assets were bought using coco le

s within the jurisdiction of the Sandiganbayan. This same decision,

er, also denied the petition for intervention of coconut far

since government is alread


57

2.

shares in the bank;

nd,

lared “shares to be

owned in private capacities” are unconstitutional and

inconsistent with the mandate to which coco levy was collected;

d. cquired with coco levy funds and, therefore,

declared government as the beneficial owner of UCPB.

3. he May 7, 2004 Sandiganbayan decision

In another decision on a Partial

Case No. 0033 – F, specifically dealing with 27% SMC-CIIF shares,

the Sandiganbayan ruled:

. That the CIIF Companies (SOLCOM, CAGOIL, ILICOCO,

The July 11, 2003 Sandiganbayan decision

The Sandiganbayan ruled in favor of government and farmers’

recovery efforts in Civil Case No. 0033 – A. In an 84-page decision on

a Partial Summary Judgment pleading, the Sandiganbayan noted and

ruled the following on some 72% shares of UCPB:

a. That Cojuangco did not spend any single centavo to acquire his

b. That the distribution of shares of the bank lacked just basis a

therefore, nullified;

c. That certain sections of PD No. 755 that dec

That the bank was a

T

Summary Judgment involving Civil

a

SPMC, GRANEX, LEGOIL);


58

b. That the 14 Holding Companies;

c. And the CIIF Block of San Miguel Corporation (SMC) shares of

stock totaling 33,133,266 shares as of 1983, together with all

dividends declared, paid and issued thereon as well as any

of

ARE DECLARED OWNED BY THE GOVERNMENT IN TRUST

Th

decided as well on the subject assets of 0033 – B, the CIIF

Companies.

4.

The Sandiganbayan merely reaffirmed its earlier decisions of

tions

ntly

that:

onut levy

funds, THE COCONUT FARMERS WHO CONTRIBUTED TO IT

increments thereto arising from, but not limited to, exercise

pre-emptive rights;

FOR ALL THE COCONUT FARMERS AND ORDERED

RECONVEYED TO GOVERNMENT.

is particular decision on Civil Case No. 0033 – F, in effect,

The December 28, 2004 Sandiganbayan decision

July 11, 2003 and May 7, 2004 in this decision denying the Mo

for Reconsideration filed by Cojuangco et al. but significa

stressing

It is high time that the real beneficiaries of the coc

,

and the entire coconut industry be given a chance to reap the

benefits that are due them.


59

Meanwhile, the Sandiganbayan decided to put the matter of the

other block of SMC into trial by merits. Cojuangco had gained voting

rights

and

to d

August 2005 the Office of the Solicitor General (OSG) filed

sep

f

)

Courts’ own

pronouncements in putting an end to the decades-old coco levy cases.

tion 005)

to the 20% SMC block from Sandiganbayan in February 1998

sequestration was lifted in October 2004. Sandiganbayan has yet

etermine ownership of the said SMC shares.

In

arate Motions for Writ of Execution of the decisions by the

Sandiganbayan on the UCPB and the CIIF-SMC block cases. A Writ o

Execution shall enable government to dispose of the shares (privatize

and utilize the proceeds for programs for the industry and the farmers.

The Motion for Writ of Execution centered on the

Court / Date Court Pronouncements Motion for Writ of Execu(filed Aug. 9, 2

SupSep

address d

long-standing hardships in the lives of millions of coconut farmers.

reme Court t. 14, 2000

Civil Case No. 0033 has remained unresolved by the Sandiganbayan. The delay is no longer tolerable for it locks in billions of pesos which could well rev-up our sputtering economy.

Considering the political and economic conditions in the country, the proper utilization of the aforesaid assets derived from the coconut levy funds could be the only hope to genuinelythe multifarious ancomplicated problems in the coconut industry and the

Supreme CourtSept. 14

Woem

ps

3.

Unless th

s

, 2000

rse, it constitutes another barrassing evidence of

snail-paced justice, so long lamented but mostly by our lialone. The Sandiganbayan must not be the burial ground of cases of far-reaching importance to our people. It is time to write finis to Civil Case No. 003

e government sets the pace with bold and forthri tionnow, the industry might just degenerate into what some of its critics term it to be a sunset industry. Truly there is a needto take decisive steps to remedy social and economic inequities and quickly bring justice, life and dignity to every coconut farmer.

ght decisions and ac

Supreme Court Dec. 14, 2001

Furthermore, the Sandiganbayan is ordered to

It is about time that the true beneficiaries of the coco levy


60

Court / Date Court Pronouncements Motion for Writ of Execution (filed Aug. 9, 2005)

decide with finality the aforesaid civil cases within a

from.

ill

d

period of six (6) months from notice. It shall report to this Court on the progress of the said cases every three (3) months, on pain of contempt.

funds reap benefits thereAny further delay in the execution of the Partial Summary Judgment wrender it illusory (not real), as the coconut industry habeen degenerating and the coconut farmers gasping for improved lives.

Sandiganbayan Dec. 28, 2004

farmers who contributed to it, and the entire coconut industry

to reap the

t al.)

nt

d

It is high time that the real beneficiaries of the coconut levy funds, the coconut

be given a chancebenefits that are due them.

Defendants (Cojuangco edo not claim to have acquired,and to be owners of what arereferred to as the CIIF Block. Evidence includes RespondeCojuangco’s own admission – that the UCPB shares in question herein had been purchased with funds raisethru government levies imposed on coconut farmers.

C shares Coj otio

portion of the said sha o

UCPB. Cojuangco obt f lo

during the time of President Estrada. Between 1999 and 2001, the

UCPB granted almost Php 4 billion loans to com

Cojuangco and Ramon Ang, Vice Chairman and

The loans were backed by questionable collaterals and payment was

har

IV.

Sensing that the trial by merits would prolong the resolution of the

uangco forwarded a M

res to pay his Php 6 billi

ained a huge amount o

20% SM n for Authority to Sell a

n obligation to the

an from the bank

panies linked to

President of SMC.

d to get by. With OSG’s opposition to the Motion the case is set for

resolution.

POLICY RECOMMENDATIONS

With or without the coco levies the problems plaguing the coconut

ustry needs to be immediately addressed. However, it would do well fo

ernment to speed up the resolution of the coco levy cases as it would

ind r

gov

spell a great big difference in its capacity to intervene.


61

nut farmers and the industry cannot

exist to live on copra alone. Dependence only on copra and coconut oil

will soon doom the industry. The international market promises huge

pot

Coconuts offer a wide array of products and by-products starting from

the coconut meat. Most promising in

The millions of impoverished coco

entials for non-traditional coconut products and by-products. The

momentum for trade of such products had already started even while the

industry is still coping with its own internal problems.

the international market today is

virgin coconut oil, oleochemicals, and the coco methyl ester or biodiesel.

Coconut Meat COCO MILK

DESICCATED COCONUT

VIRGIN COCO OIL

CAKES

BISCUITS

ICINGS

COCONUT FLOUR

NATA DE COCO

COPRA

COCONUT OILCOPRA CAKE

MARGARINEANIMAL FEEDS EDIBLE OIL

SHORTENING

SOAP

FUEL

GLYCERINE EXPLOSIVES

CHEMICALS

FATTY ACIDS

FATTY ALCOHOL

METHYL ESTER

Until today the country remains to be the largest exporter of coconut oil

in the United States and Europe. Exports of oleochemicals (coco fatty


62

acids), coconut-based raw materials for soaps and detergents, are also

expected to grow with the removal of duties by the US Generalized

System of Preferences (GSP) scheme16. The PCA reported that VCO

exports are up 268 percent from 2004 to 2005, and up 569 percent in

export earnings, mainly with the United States market. CME is gaining

wide attention in both local and foreign markets especially in Japan where

their version of the the “Clean Air Act” is taken seriously. Local use of the

CME is expected to shave 700 million liters off the country’s annual diesel

imports, translating to foreign exchange savings of some Php 20 billion.17

The coconut husk is used to produce cocopeat (dust) as soil

substitutes, and fiber, twine, and geotextile for industrial applications. In

2004 the country signed up with China National Technical Import and

Export Cooperation for the production of coconut coir and geotextile to be

exported to China.18

y

And in order to make the efforts sustainable, the millions of small coconut

farm

The shell yields coco charcoal and activated carbon while the water

can produce juice, wine and vinegar.

These and other opportunities need to be optimized by attuning the

industry’s directions. A number of capitalists have seized the opportunit

for the industry but its fate will highly depend on the basic policies of

government for the industry.

Therefore, another rationalization of the industry needs to be done.

ers and farm workers must be positioned at the core industry

development.


63

On farmer and industry development

1. Development efforts will have to commence with the basic planting,

replanting and rehabilitation of the coconut farms starting with the

r this purpose. Involvement of

the coconut farmers and their communities will have far better

trient deficient trees. This program can

utilize already available cocopeat-based organic fertilizer formulas.

Production of the organic fertilizer may also be community-based.

ed

and by-products need to be brought to the farms –

preferably in an integrated approach (similar to the CIIF Coco Farm

various parts of the coconut

(husk, shell, water). Copra for oil processing, on the other hand,

les

be

n of the “nata de coco

xperience”.

750,000 hectares planted to senile trees. Community-managed

coconut nurseries may be set up fo

reach than any government bureaucracy.

A fertilization program needs to be undertaken to address the

490,000 hectares of nu

2. While most coconut farmers rely solely on copra production

technologies for semi-processing and processing value add

products

Development Program) to optimize

can still be delivered to the CIIF Oil Mills in order to maximize its

capacity. Production of specialized uses of coconuts need to be

pushed and promoted such as virgin coconut oil (VCO), geotexti

and coco methyl ester (CME). Again the coconut communities can

very well fit into the production cycle. Quality standards need to

implemented fully in order to avoid repetitio

e

The CIIF Oil Mills, being owned by government for the coconut

farmers, should act as integrator to the small producers. The CIIF


64

Oil Mills are in the best position, so far, to market and deliver the

3.

4.

initiated by the Department of Agriculture.

5.

plementation in coconut lands as

the existing prevalent relation is still that of share tenancy.

6. ure

s

s and

coco products and by-products.

The Philippine Coconut Authority, for this purpose, should

concentrate on improving hybrid qualities of coconuts and in

sustaining copra yield of the farms. Information and technology

dissemination can be done through coconut farmer cooperatives

and associations – without exclusivity to the SCFOs.

Farm diversification must be a major thrust to make more

productive the 2.1 million monocropped coconut lands and offer

added opportunities to the impoverished coconut farmers.

Technologies for farm diversification and intercropping on coconut

lands can be

Coverage of the coconut lands by the Comprehensive Agrarian

Reform Program need to be fast-tracked. Considering that barely

two years is left for the program, the Department of Agrarian

Reform can prioritize leasehold im

Pioneering research by Dr. Conrado Dayrit on coconut oil as c

for HIV virus should be supported and pursued through the

Department of Science and Technology. The potentials the finding

may offer the coconut industry is huge.

7. Product research and development for coconuts should be

undertaken by the Department of Trade and Industry in order to

improve quantity and quality of the various coconut product

by-products for export and local use. Until today the country has to


65

export fresh coconut juice in its original package – the whole nut

8. f the

n

roducts to provide agricultural credit facilities. Design a Quedan-

copra.

On coco levy

itself.

The UCPB-CIIF Group of Companies (apart from the efforts o

Oil Mills) can be mobilized to extend various services to the small

coconut farmers. UCPB Savings and Rural Bank can desig

p

style processing for the coconut farmers where the Oil Mills, after

copra crushing services, delivers to Cocochem for further

processing to oleochemicals, thus obtaining higher value for the

farmers’ produce than just merely buying

recovery

i-billion coco levy funds and assets is

all coconut farmers in deciding the

1. While actual recovery of the mult

still at bay – participation of the sm

future of the coconut industry must be pushed and institutionalized at all

levels.

2. Ser

UCPB – CIIF Group of Companies fo

Those that do not have any beari

privatized instead so that proceeds

and be

developed for the same cause.

PHASE 1 PHASE 2 PHASE 3

ious efforts must be made in studying current and future roles of the

r the farmers and the industry.

ng at all should be liquefied /

may be utilized for coconut farmers

industry programs. Those that have direct bearing should

Preserve assets and prevent

Hurdle legal & extralegal battle

Determine assets to liquefy / privatize / retain and develop

Determine & implement coco farmer and industry programs

dissipation


66

Government should exhaust its efforts in obtaining the Writ of Execution

from the

3.

Sandiganbayan on the case of the CIIF-SMC shares. The Writ

shall enable government to liquefy the said shares and gain a

4.

ry of

ers and the industry. To be truly

meaningful the structure should ensure the participation of the small

coconut farmers from the natio Barangay level

ecom nded structure: conut Trust Fun ittee

and the Local Coconut Development Councils

In setting up the structure and mechanisms it is important to note that

oco levy

”

om

Php 50

billion can serve as a perpetual trust fund, the annual interest of which

substantial amount of, at the least, Php 50 billion in liquid cash that it

should use for programs to develop the industry and its farmers.

Prior to liquefication of any recovered coco levy asset, it is important to

determine structures and mechanisms that shall ensure the delive

meaningful programs for the farm

nal to the s.

R me The Co d Comm

the coconut levy funds were collected for a specific purpose and can,

therefore, be utilized only for such specific purpose. The December 14,

2001 ruling of the Supreme Court clearly manifested that the c

funds should be utilized “for the benefit of the industry and its farmers

– not for any other purpose.

The nearest to recovery is the CIIF-SMC shares worth Php 50 billion.

Upon the sale of the said shares the amount must be separated fr

the general funds of government pursuant to the Supreme Court and

Sandiganbayan rulings – A TRUST FUND. The amount of


67

may be utilized for programs for the development of the industry and

the farmers.

MONITORING

TRUST FUND COMMITTEE

Office of the

President

INVESTMENTSPROGRAMS

(annual interest)100%

BRGY.

OTHER BANKSUCPB

LOCAL PROGRAMS

60%

NATIONAL PROGRAMS

40%

LOCAL COCONUT DEVELOPMENT

COUNCILS(municipal)

BRGY. BRGY.BRGY.BRGY.BRGY.BRGY.

PCA/DA DAR DOST DTI CIIF

Government Representatives

Farmer Representatives

(men and women)

Other Stakeholders

Programs to directly benefit coco farmers

& communities

Programs to develop the coconut industry

Local Government Representatives

Farmer Representatives

(men and women)

Other Stakeholders

A Trust Fund Committee may be set up under the Office of the President.

The Trust Fund Committee shall be composed of government

representatives, farmer representatives and other stakeholders in the

industry.


68

The Committee shall be primarily tasked to manage the perpetual fund

and allocate its annual earnings to two basic programs:

a) Local Programs (60%) – programs that would directly benefit the

coconut farmers and their communities. As contributors to the coco

levies the farmers should justifiably benefit from the funds. Direct

benefits to coco farmers may not have any direct bearing to

coconut production. Intercropping and livestock-raising shall

expand the income opportunities of the farmers but will have no

direct bearing to the coconuts. Other examples are social and

health programs such as capacity building for organizational

management / enterprise development, scholarships and health

insurance.

b) National Programs (40%) – programs to boost the development of

the coconut industry. Through its agencies the national government

shall implement its integrated programs for sustainable coconut

production, processing and marketing in accordance with the

directions for the industry. Several agencies may be tapped for this

purpose: the Philippine Coconut Authority, the Department of

Agriculture, the Department of Agrarian Reform, the Department of

of the programs (local and national) will have

direct bearing on 68 coconut producing provinces and more than 1,500

tion,

plementation, and monitoring and evaluation of projects and programs.

Science and Technology, The Department of Trade and Industry

and the UCPB-CIIF Group of Companies.

The implementation of any

coconut municipalities. It is, therefore, essential as well that local

structures be established for planning, program identifica

im


69

The

barang

The Lo d

Committee at the local level to

representatives, coco farmer communi

The Lo

needs of their particular communities; plan development initiatives for the

rmers and their local coconut industry assist in the implementation of the

pro

The st ut

farmer

develo

equity lated

by the

In the words of President Gloria Macapagal-Arroyo: It is high time to give

ernments and to take power from

creation of the Local Coconut Development Councils from the

ay to the municipal level can serve this purpose.

cal Coconut Development Councils shall mirror the Trust Fun

be composed of local government

ty leaders and other stakeholders.

cal Coconut Development Councils shall be tasked to identify the

fa

grams and serve as monitoring arms of the Trust Fund Committee.

ructure institutionalizes mainly the participation of the small cocon

s and farm workers in the whole picture of coconut industry

pment to assure its sustainability and correct the existing skewed

distribution in the industry. The Trust Fund set up may be legis

Philippine Congress or through an executive fiat.

more power and autonomy to local gov

the center to the countryside that feeds it. [SONA, July 25, 2005]

1 Philippine National Standards, PNS/BAFPS 22:2004 / Amendment 1:2005 2 Agustin, Yvonne T. V., “A Brief on RP Coconut Industry”, United Coconut Associations of the Philippines (2005) 3 Ramirez, Allan, “The Cooperatives on Direct Copra Marketing and Micro-finance of the UCCIIF”, Coconut Industry Reform Movement, Inc. (2005)

PB-

p” (May 2003) 5 Supreme Court, Cocofed et al. vs. PCGG et al. [GR No. 75713, October 2, 1989, 178 SCRA 236]

-M coconut levy ready to benefit farmers – Arroyo”, Manila Bulletin, July 3, 2002 Gov’t scored for inadequate assistance to coco farmers, BusinessWorld, July 16, 2002

4 Faustino, Joey , “One Year of Farmer-Directors in the UCPB-CIIF Grou

6 “P7007


70

n behalf of

ber 2004) The 12 Year Cocofund War, VOX POPULI, V4N3-98 Presidential Executive Order No. 828

/ siness Section, October 14, 2005

Domingo, Ronnel W., “RP-China countertrade deal boosts coco exports”. Philippine Daily Inquirer / Business Section, June 16, 2005

Racket”

Faustino, Joey, “CRONYcles on the Coco Levy Scam” (2003) Fife, Dr. Bruce literatures:

a) The Healing Miracles of Coconut Oil

Philippine Peasant Institute, “Sampung Tanong ni Tano sa Coco Levy” Dr. Fife website: http://www.simplycoconut.com/ PCA: http://pca.da.gov.ph/

8 Presidential Decree No. 755 (issued 1975), ordering the acquisition of a bank for and ithe coconut farmers reflects the intent “to solve the perennial credit problems of the coconut farmers.” 9 Faustino, Joey, “Hurdling the Leap Towards Recovery of the Multi-Billion Coco Levy Funds” (Decem10

11

12 Chavez, Francisco I., “How Coco Levy Funds were Used in the Acquisition of SMC Shares” 13 Rosales, Angie M.,”‘Secret’ deals slammed”, Philippine Post, July 20, 1999 14 Coco-Dile File (1992) 15 Policy Update, Volume 4 No. 9 & 10 (September – October 1996) 16 Domingo, Ronnel W., “US allows duty-free imports of coco products”, Philippine Daily Inquirer / Business Section, July 14, 2005 17 Ho, Abigail L., “For RP, CME use means P23B/year in savings”, Philippine Daily Inquirer Bu18

Other sources: CIIF Factbook by United Coconut Planters Bank (2005) Coconut Industry Reform Movcement, Inc., “Mga Katanungan / Kasagutan sa Isyung Coco Levy” David, Virgilio M., “20 Million Coconut Farmers are Victims of LevyDayrit, Conrado S., “The Truth About Coconut Oil: The Drugstore in a Bottle”

b) Eat Fat Look Thin c) Coconut Lover’s Cookbook d) Coconut Cures e) Cooking with coconut flour f) The Coconut Oil Miracle

UCAP: www.ucap.org.ph


71

Facing the Challenges of the Philippine Coconut Industry the Lifeblood of 3

Documents

Transcript of Facing the Challenges of the Philippine Coconut Industry the Lifeblood of 3