Coco Farmers' Conference Paper_102912

7/31/2019 Coco Farmers' Conference Paper_102912

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A SMALL FARMER-CENTERED APPROACH

TO SUSTAINABLE COCONUT INDUSTRY DEVELOPMENT

Inputs for Coco Levy Utilization

Drafted by the Coconut Industry Reform (COIR) Movement, Inc for the

Coconut Farmers Conference, 29 October 2012

Laying Down the Ground Rules on the Use of Coco Levies

In anticipation of the dawning of the Supreme Courts Entry of Judgment on the 24%

CIIF-SMC preferred shares, the present buzzwords on the coconut front are roadmap

and utilization. Most obviously all will claim that any measure proposed or taken by

government shall be in the name of the millions of coconut farmers and for their benefit

just as it was during the Martial Law regime.

The coconut levies (CCSF, CIDF, CIIF, etc.) were all guided by a clear declaration of policy:

so that the coconut farmers become participants in and beneficiaries of the

development and growth of the coconut industry. [PDs 232, 276, 414, 582, 755, 961,

1468, 1841] Oscar Santos -- former legislator who for more than three decades now had

not halted on efforts to recover the huge coco levies from Marcos cronies -- counted the

phrase for the benefit of the coconut farmers to have been repeated at least 82 times

in all coco levy issuances. But the glaring fact is that only a few and privileged cronies

lavished themselves in the vast wealth of the industry leaving the farmers in stark

poverty. Such is a basic understanding that not even seven magistrates in the Supreme

Court of 2011 can change with a mere apathetic ruling. [The April 2011 ruling of the

Supreme Court on the 20% SMC shares averred that government was not able to prove

that Eduardo Cojuangco, Jr. was a crony of former President Marcos the biggest joke

to hit the century, according to Associate Justice Conchita Carpio-Morales]

On December 14, 2001, the Supreme Court categorically stated that the coconut levy

funds are not only affected with public interest, but are prima facie public funds. The


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Inputs for a Coconut Industry Development Roadmap

In cooperation with the Department of Agriculture

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a new coconut industry significantly contributing to national development powered by organized, emancipated and

enlightened small coconut farmers and their communities who have control of significant aspects of the industry from

farm production to processing, marketing and technological development; having effective participation in

governance and policy-making; adhering to principles of social justice and sustainable development; with respect for

basic human rights regardless of gender, ethnicity, religion and age.

Court further added that said funds were for a specific purpose for which they were

collected for. Following the determination of ownership by the Sandiganbayan in 2004

and 2007, the Supreme Court, last January 2012, ruled on the cases of the United

Coconut Planters Bank, the Coconut Industry Investment Fund Oil Mills, the 14 Holding

Companies and the 24% CIIF-San Miguel Corporation shares. The ruling upheld

Sandiganbayans earlier resolution that the said assets were public, owned by

government in trust for the coconut farmers. In addition, the Court emphasized that the

said asset is to be used only for the benefit of all coconut farmers and for the

development of the coconut industry. One should take note that such a decision was

based on the avowed intents of the coconut levy issuances, especially that it affects the

national economy (October 2, 1989 SC decision) with the benefit of all coconut

farmers as a primary concern in developing an all-important industry to spur the

Philippine economy. Any effort, therefore, to develop the industry but is void of direct

benefits to the coconut farmers may be a concern of the government but not of the

coco levies. A case in point was last years

campaign by the President to attract a USD 14

million foreign investment on the utilization of

coconut water for the US market. The move

hardly added anything to the coconut farmers

as it merely widened the market for whole-nut

buying at the farm level. Whole-nut buying did

not add any value at all as prices were based on existing copra buying rates and

maintained farmers to be plain raw material producers just the same.

This brings to concern, among others, the current trends in the treatment of some Php

71 billion proceeds of the CIIF-SMC preferred shares redeemed by SMC in October 2012.


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A Presidential Task Force on the Coco Levy, headed by the Presidential Management

Staff, was formed by Malacanang in May 2011. The PMS was tasked to coordinate with

the Department of Agrarian Reform, the National Anti-Poverty Commission, and the

Presidential Commission on Good Government. This Task Force was specifically

instructed to:

1. Propose a system that will properly and accurately identify the beneficiaries ofthe SMC shares; and,

2. Identify possible options on how to utilize the proceeds of the shares for thebenefit of the beneficiaries.

This Task Force appears to have started on the wrong foot. The coconut levies were

primarily intended to benefit the coconut farmers as a class and not as mere individual

beneficiaries. There is nothing wrong with identifying individual farmers. That may be

done at the barangay level. It does not mean, however, that the coco levies may not be

mobilized until such time that all coconut farmers are identified.

It was Cojuangco et. al who used the farmers identification as a tool to conjure up the

biggest scam during Martial Law. Farmers were individually named to be put in stock

certificates of companies they acquired with the Coconut Industry Investment Fund,

with the exception of the two biggest blocks of shares in San Miguel Corporation the

biggest acquisition. This was so designed to justify claims that the companies acquired

were owned by coconut farmers. The distribution of stock certificates, however, was

later discovered to be a cover up of the real picture cronies owning 77.9% equity of

the mother company of the coconut monopoly, the United Coconut Planters Bank (COA

Report 1986).


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The Sandiganbayan, as upheld by the Supreme Court, had declared individual ownership

to be unconstitutional. Taxes or levies collected by the state constitute a public fund

that may not be transferred into the private ownership of any individual or juridical

entity. This negates as well the proposal to now simply distribute the proceeds of the

24% SMC shares to the coconut farmers. Besides, the fund would only roughly fetch a

one-time Php 20,000 for each farmer. Government holds in trust the public fund (coco

levies) to which coconut farmers are beneficial-owners. As such government holds the

responsibility of coming up with programs for the farmers and the industry. And it

follows that any program spending or related acquisition, therefore, from such coco

levies should be geared towards the benefit of the farmers as a class and the

development of the industry.

In consideration of the aforementioned, now come various proposals by different

government entities:

1. Coconut Industry Poverty Reduction Roadmap of the National Anti-PovertyCommission

This roadmap, a product of the Presidential Task Force, is composed of four (4)

program components involving inter-agency coordination:

A. Agro-enterprise Development DA/PCAB. Fast-Tracking Agrarian Reform in Coconut Lands - DARC. Social Protection - DSWDD. Institutional Reforms - NAPC


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Except for some small details left unexplained (i.e. 1.5 hectares qualification for

agro-enterprise development program) the plan appears to be quite defined

among the Departments targeted for implementation (DA-PCA, DSWD, DAR,

NAPC). The proposal carries reasonable programs, supplied with ample analyses,

for the sector which government ought to do under General Appropriations

BUT NOT WITH THE COCO LEVIES.

For example, fast-tracking agrarian reform in coconut lands is a necessary

component of establishing ownership and control of the small farmers for

eventual development of the industry. For such a purpose, however, there

simply needs to have a clear policy declaration from the President for the

program (CARP) has its own allocation under R.A. 9700 of P30 billion per year

but not being granted by Congress thru GAA. To fund fast-tracking measures

from coco levies now would be tantamount to saying that the coconut lands may

not possibly be covered under the current law and program unless farmers

monies are contributed to it. It is governments (DAR) responsibility to cover

cocolands without any need of funding from the coconut farmers themselves.

Creation of local mechanisms and strengthening agrarian justice for the farmers

should come with the regular program of the Department of Agrarian Reform if

the Administration is serious in completing the program by 2014. On the side,

there is still the hanging question of why CARP coverage of coconut lands total to

only 800,000 hectares out of the 3.4 million hectares. There is no figure to show,

as of yet, that the rest of 2.6 million hectares of cocolands are either considered

forestland/timberland, beyond 18% slope, and/or pastureland. A policy for cases

of qualified theft being hurled by landowners at coco farmer-leaseholders or


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potential beneficiaries need to be clarified anew with the regular courts so they

may be directed to the agrarian court.

While credit facilities/livelihood assistance (social protection/SEA-K) and

technical support (agro-enterprise development) for intercropping and livestock

integration are recommendable programs for coconut farmers, it will have to

come under special programs of the Departments concerned and not simply

become extension of current programs. No less than Secretary Proceso Alcala of

the Department of Agriculture had declared that the government can move

towards this direction by additional allocations from General Appropriation even

without waiting for the coco levies. And, indeed, the budget for the Philippine

Coconut Authority had started to increase since year 2012. Programs from coco

levies ought to be special programs with oversight of a special body. Such is the purpose

of pending twin bills in the Senate and House of Representatives. Senate Bill No.

2978 and House Bill No. 5070 both aims to establish the COCONUT FARMERS

TRUST FUND TO PROVIDE ADEQUATE FINANCIAL PROTECTION TO THE COCONUT

INDUSTRY AND ITS WORKERS, PROVIDING FOR THE MANAGEMENT THEREOF,

AND FOR OTHER PURPOSES. But while the Senate version is moving along under

its Committee on Agriculture, the House version had not even been scheduled

for any hearing at all. Pending legislation, the President may issue an Executive Order to

carry on the same purposes. But to allow adequate protection of the funds for the coconut

farmers and the industry, the President can certify the said bill as urgent. It is of utmost

importance to identify and earmark the funds for its specific purpose.

The coconut farmers monies were not meant to simply pad and sustain the

governments already existing programs. It would be a double burden on the


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coconut farmers if the coco levies they contributed to were utilized in place for

what government should spend for in the first place. Government, as trustee of

the farmers contributions, carries the responsibility to attune coconut farmers

benefits to the development of the industry.

As the Sandiganbayan pronounced in its December 2004 resolution:

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.

2. Additional capital for UCPB by the Department of Finance

The Department of Finance is believed to support the claims of UCPB over

indirect equity on the SMC shares amounting to P7.5 billion. UCPB -- a company

fully funded by the coco levies in 1975 via PD No. 755 -- now wants to collect

from the very same fund that built it for an indirect investment it had made. The

reason appears to be purely of financial and banking consideration wanting to

keep UCPB afloat with additional capitalization. Apart from the fact that the

bank was built by coco levies it is not in any way related to any benefit of the

coconut farmers at all not before, not today. Whereas PD 755 mandated the

bank to solve the perennial credit problems of the coconut farmers, the banks

loan portfolio does not even include anything related to coconuts in its entire

existence. At the very least it created the Coco Finance and Development

Corporation to answer for microfinancing coconut initiatives. Cocolife and the

CIIF Oil Mills Group expect to follow with their own claims thereafter. What can

be more discouraging than the very companies used to deprive the farmers of


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their benefits before now want to be first in line? This is the most preposterous

yet among the proposals from within the Task Force.

3. Coconut Industry Road Map of the Philippine Coconut Authority

This roadmap had come ahead of the presidential instruction but had taken

time to be completed by the PCA. Its drafting was not primarily based on the use

of the coco levies. Today it still comes in powerpoint presentation format only.

As expected, the traditional objectives of the plan are for improved quality of

life of coconut farmers and to build a globally competitive coconut industry.

The PCA had this in mind since time immemorial. The so-called roadmap,

however, merely reflects the operational plan of the agency no more, no less.

Such is the reason why the roadmap sorely lacks in participation of

stakeholders, especially the farmers. Like previous plans of the agency the

roadmap hardly focuses on any particular direction for the industry much

less the farmers.

Claiming to be the sole agency mandated for coconut industry development, the

PCA is also eyeing to get hold of the entirety of the coco levies to fund their

programs. But apart from the fact that the agency has had little experience in

developmental programs over the decades, what is alarming is its current

interpretation of the most recent SC decision on the coco levies. PCA has the

tendency of interpreting the phrase for the benefit of all coconut farmers in its

literal form to serve both small farmers and big landlords. It will be sad to note if

the PCA Charter of the 70s had not, until today, taken roots on the agency that

once pillared the coconut monopoly for the big landlords. PD 232 (July 1, 1973)


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creating the Philippine Coconut Authority declared that the accelerated growth

and development of the industry was specifically so that the benefits of such

growth shall accrue to the greatest number.

Indeed the greatest number considers the small coconut farmers and farm workers who

serve as the backbone of the industry. 92% of the industrys workforce is composed of

the small farmers and farm workers 3.5 million of them who along with their families

would easily add up to a fourth (60% women) of the entire Filipino population. It is they

who should be the center and focus of development initiatives with the use of the coco

levies.

Worrisome is the deafening silence of the Executive Branch on such matters of the coco

levies. Without very specific guided instructions coming from the executive leadership,

more and more plans, programs and roadmaps may be expected from other

government agencies as well. The Department of Trade and Industry had taken up the

cudgels for developing markets of the coconut fiber while the Department of Energy

looks into increasing utilization of the coconut methyl ester (CME) for biofuel. Soon

enough the available coco levies might be too small for the genuine farmers to have a

share of the benefits if the available fund is left to government alone to decide and

dispose of. Even worse, without clear pronouncements, the various players in the sector

itself can even tend to race for access and care less about other non-member coconut

farmers bringing about two troublesome scenarios: agawang-buko and kung sinuman

ang malapit sa kusina.

So far the roadmaps and proposals for utilization of the coco levies still lack the

necessary consultation process with the coconut farmers. It is for this purpose that this


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conference paper is presented, in coordination with the Department of Agriculture, to

draw up perspectives from the coconut farming sector and develop initiatives from

thereon for inputs to a sustainable roadmap for coconut industry development that is

inclusive for all.

In sum, the following guideposts on the utilization of the coco levies:

1. That coconut levy funds and assets are public funds and, therefore, fall underthe control and audit of government;

2. That coconut levy funds and assets are special funds which may only be utilizedfor the purpose for which it was collected for the benefit of the coconut

farmers and the industry;

3. That coconut levy funds and assets should benefit the coconut farmers as aclass;

4. That coconut levy funds and assets should benefit the coconut farmers and theindustry thru programs and services of the government with ample

participation and representation by the sector; and,

5. That the coconut levy is not only about recovering huge investments made butalso about carrying out the mandate of the coco levy funded / coco-related

companies while under governments care.

Preservation of the coco levy funds to ensure continuous support for the poor farmers

and the industry should be another concern. The existing coconut levy funds ought to be

treated as a perpetual fund using only annual interest earnings to fund programs for the benefit of

the farmers and the industry. Its use, on the other hand, should be made fully transparent to

its publics.


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I. Socio-Economic Realities in the Coconut Industry

To many urban dwellers the coconut is known only as the young coconut, buko, for fruit

drinks and dessert. To the rural communities the coconut is largely known to be merely

copra. Coconut farmers rely on copra production alone to meet their families daily

needs. This is the way it had stayed for centuries.

The National Anti-Poverty Commission cites

At 60% poverty incidence, coconut farmers are the poorest and most socially

insecure sector in the country, with daily income averaging at PHp 40/day. Improving

the lives of 4 million coconut farmers and their families should therefore be a strategic

focus of the governments anti-poverty programs. (Excerpts from NAPC letter to the

leaders of the coconut farmer groups dated May 23, 2011)

An individual-focused anti-poverty program for poor coconut farmers may take forever

to achieve a sustainable impact unless such a program is designed to alter economic

relationships in the industry and effect structural changes. The Philippine coconut

industry is largely founded on copra production a copra-based industry. Any product

derived from coconuts is measured in copra terms. Copra is dried coconut meat, sun-

dried or with the use of dryers. 91% of coconut production is processed into copra for

oil milling and the rest of the 9% is used as fresh nuts for desiccating, virgin coco oil,

coconut cream, etc.


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The concentration on oil milling is a product of the coconut monopoly established by the

cronies during the Martial Law era. Three decades thereafter the annual copra

production still pales in comparison to the annual oil milling capacity.

Annual Copra Production

(ave.)

vs.Annual Oil Milling Capacity

2,400,000 MT 4,500,000 MT Copra

Bulk production is exported as crude coconut oil (CNO). Major export destinations are

US and Europe jointly at 80%. This makes the Philippines the largest exporter of CNO in

the world market with a share of 45%. In the last five years the industry had raked in

close to USD 1B per year (average) on export income making coconut the #1 agri-crop

dollar earner for the country. While the figure appears to be outstanding, as far as

export performance of Philippine crops are concerned, the CNO is in stiff competition

with 16 other vegetable oils in the world market with only a 2% share.

Moreover, the Philippines remain to market the biggest share of CNO in the world

market only because 80% of its coconuts are utilized for export purposes and the

remaining 20% for domestic use. Indonesia which closely follows the Philippines in the

CNO market share applies an opposite strategy 20% for export and 80% for domestic


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use. This had made the Philippine

coconut industry totally dependent on

the volatile international CNO market,

tagging along the price of the farmers

copra with it up to the farm level. Such

that when the volume of CNO export

increases, the world market price

decreases and vice versa so do copra

prices at the farm level.

In addition to the volatile world market prices, the coconut farmers will have to

additionally contend with the long chain of traders who can bring their copra to the far-

away oil mills. The oil mills are generally situated in cities far away from the production

areas and inaccessible to small coconut farmers. On top of this a tenant-farmer would

have to share earnings from the copra-produce to a landowner. And at the other end,

the big multi-national companies which used the all-important high-end by-products of

coconuts to manufacture consumer products (soap, detergent, shampoo, cosmetic,

food, etc.) continually profited immensely.

In view of the situation, Prof. Cielito F. Habito, Ph.D., of the Ateneo Center for Economic

Research and Development posed 3 assertions in reference to handling the industry:

Assertion 1: Success in the sector is not measured in terms of production levels, but in

farmers incomes and welfare.

Government has not been successful in the coconut industry Higher production does not necessarily imply higher farm incomes


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Jobless growth in agriculture DAs performance has been wrongly judged on the basis of production levels

Assertion 2: Farmers will not invest in improved productivity for as long as they get a

meager share of their products value.

Farm price-to-retail price ratio lower in RP than in ASEAN neighbors Farmers do not have enough cash or access to formal credit Low rates of technology adoption Challenge is to let farmers get a better price (& understand why they dont)

Assertion 3: Local monopsonies have been a persistent feature of the rural economy

for too long.

Agri-processing traditionally concentrated in large facilities Credit linked with trading Local trading cartels Poor rural transport infrastructure limits farmers options Clustering (ala Normin Veggies, Malaysian FELDA), an effective counterforce

[Philippine Agriculture and the Coconut Industry: Wanted Fresh Approaches, Sustained

Plans, a presentation by Prof. Cielito F. Habito in the 2010 Coconut Summit]

The assertions forwarded by Prof. Habito have been proven through time and practice.

Government, for a long-long time, had mastered the art of planting, replanting and

fertilization of coconuts. The PCAs researches concentrated on increasing copraquantities and qualities. These researches were done with great pride and achievement

for coconut agriculture. It did not, however, address the farmers incomes to a point


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where selling the tree for lumber had become a basic survival instinct. Coupled with

landowners trying to evade CARP, coconut tree cutting had remained unabated placing

the industry in danger.

With the continuous prodding of farmer-directors in the boards of the UCPB-CIIF Group

in 2004, the CIIF Oil Mills launched and supported more than 150 Direct Copra

Marketing Stations all over the country with funds coming from redeemable shares of

the OMG to UCPB essentially the coco levies. The concept was founded on Direct

Farmer (cooperative) to Mill Copra Trading. Under the scheme the CIIF provided

cooperatives with a Php 250,000 working capital with transportation and warehouse

subsidies. After two years only a handful, literally, survived and the rest fell in deep

debts. Even with such support the cooperatives were not able to compete with the big

traders who were given premium prices by the mills on account of the volume they can

muster. A big trader can easily deliver the volume of, at least, 7 cooperatives in a month.

So dire is the existing poverty among coconut farmers within the copra industry that

even personal or peer loans encountered great difficulty in addressing the need. Oscar

Santos was appointed to the Board of the UCPB-CIIF Finance and Development

Corporation (Cocofinance) in 2002, a subsidiary of the UCPB-CIIF Group of Companies.

After almost two years he decided to resign as he felt the companys microlending

programs were not enough to concretely help the coconut farmers. Ka Oca cited the

following in his letter of resignation:

From a laymans 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:


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Many coco farmers cannot accept why they have to pay interest on loans from the funds theyMany coco farmers cannot accept why they have to pay interest on loans from the funds theyMany coco farmers cannot accept why they have to pay interest on loans from the funds theyMany coco farmers cannot accept why they have to pay interest on loans from the funds theypainfpainfpainfpainfully contributed toully contributed toully contributed toully 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.

xxx

Loan not suited for the really poorLoan not suited for the really poorLoan not suited for the really poorLoan 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 dueloans. (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.

xxx

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 fundstaken from them should be utilized. They would surely know what they need better thanThey would surely know what they need better thanThey would surely know what they need better thanThey would surely know what they need better than

we do.we do.we do.we do.

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

Second lookSecond lookSecond lookSecond 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 asto assist and benefit meaningfully as many coco farmers asto assist and benefit meaningfully as many coco farmers asto assist and benefit meaningfully as many coco farmers as possible with the least possiblepossible with the least possiblepossible with the least possiblepossible with the least possible

expenseexpenseexpenseexpense. The key word is meaningfully.


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So Ka Oca goes on to proposing alternative programs that may impact on the lives of the

coconut farmers at the time:

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 ofUS100M 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 significantsignificantsignificantsignificant since coco farmers nationwidenationwidenationwidenationwide 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.

The copra-based industry, in its centuries of existence, has reached its peak. It has

nowhere else to go but feed the worlds various industries with the wonder coconut oilor at its best, its oleochemicals. Today more and more uses for the wonder nut had

been discovered paving the way for new developing markets (neutraceuticals,

cosmeceuticals, pharmaceuticals, renewable / biodegradable resource-based materials

and fuels, etc.) that cater to more basic and current worldwide necessities food,

health and environment. Unlike the well-entrenched traditional and poverty-ridden

copra industry, the emerging new industries in the coconut sector offer a greater variety

of products, choices and, most importantly, more efficient utilization of the countrysrich coconut resources true enough a golden opportunity. Moreover, on its building

stage the lessons from the age-old copra-based industry may be applied so as not to


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leave behind the lot of small coconut farmers and farm workers instead making them

the center of development. This ought to be a primary direction for the utilization of the

coco levies at hand FRESH APPROACHES, SUSTAINED PLANS for the benefit of the

coconut farmers, the industry and the national economy.

It will definitely take much effort to build through new directions for the poor coconut

farmers and the industry. The farmers themselves would have to participate in the

whole process along with their communities. Public information beyond copra and

coconut oil is greatly limited as of yet such that full potentials of coconuts are often

overlooked. So few know how coconut products and by-products affect our everyday

lives. Very few of the farmers know what coconuts can really do. Faced with various

problems within the copra-based industry, most have yet to comprehend how one

problem leads to another. There ought to be massive information dissemination on the true state

of the coconut industry and promotion of the various potentials of the coconut thru tri-media,

especially for the farmer-producers.

II. Filling in the Gap: A BUKOD-KOPRA Approach

While in the state of the copra-based industry there are still several options that can be

taken to somehow effect increased incomes or improve lives of the poor coconut

farmers, farm workers and their communities particularly the optimization of the use

of the coconuts and the cocolands, whichever is applicable. These options may do well

to serve during a transition stage from the copra-based industry to the new fresh

(fresco) coconut industry.


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Mature coconut water, the newest in-thing in the markets today, is a great resource to

muster. There is 1/3 of a liter of water in every nut. At current production rate there is

some 15 billion nuts harvested per year. The President, during his 2012 State of the

Nation Address, shared the good news of how exports of coconut water has grown to 16

million liters. Little was known that our farmers have been wasting 5 billion liters every

year.

Conchita Masin, leader of the Agraryong Repormang Samahan ng mga Kababaihan

(ARSK) in Barangay Nangan, Governor Generoso, Davao Oriental, had in her

associations command some 65 hectares of cocolands awarded thru CARP. With a good

yield of 60 nuts per tree per year (120 trees per hectare), the association can collect

156,000 liters of mature coconut water per year. Seeing the potential of producing the

coconut water concentrate -- a thick gourmet sauce likened to soy sauce / oyster sauce

produced from continuous boiling of mature coconut water -- the association had

started selling the product in their own and neighboring communities. With continued

patrons the association is looking forward to sell some 7,800 liters of the concentrate at

Php 100 per liter, earning them an additional Php 780,000 (gross) or Php 12,000 per

hectare per year.

The mature coconut fiber, coconut peat, coconut shell with the liquid smoke (cooled

smoke from charcoal production), if harnessed into use for the communities themselves

can add more to the communities incomes.

Eric Rabat, a Board Member of the Province of Davao Oriental, runs a decorticating

plant in Mati. Eric stumbled into a buyer of coconut fiber hanks. He then contracted 40

households in a fishing village, Camansi, to twine the coconut fiber and weave them into


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hanks. The women and the children in the village participated in the undertaking. The

effort had since added Php 300 daily income to each of the households. The effort

allowed the men as well to skip from daily fishing allowing more time for the fishes to

grow and reproduce. Eric had since combined his coco peat with chicken dung, sacked

and given to farmers to fertilize the farms. His latest endeavor is to provide women in a

barangay with the short coco fiber that hardly passes export standards. The short coco

fiber is processed by the women into pots for seedlings to replace non-biodegradable

plastics and earns additional income for their families.

Then somehow there can still be value-addition to copra itself.

In Masbate Island the Paris Manila Technology Corporation (PAMATEC) intends to

provide electricity to 80-100 rural households per barangay thru a mini-grid by

extracting coconut methyl ester from a feedstock of 30 kilos of copra per day.

The Coconut Industry Reform Movement in 2009 had tried facilitating copra

consolidation of 500 tons with coconut farmer groups in Region XI and tied the effort to

a Toll-Crushing Agreement with the Legaspi Oil Mills in Davao City. The agreement

allowed the farmer groups to deliver copra to the mill via express lane with an

assurance of a fair weighing / volume computation. This is due to the fact that the mill

shall be paid a processing fee for every kilo of copra. The resulting value-added crude oil

or refined oil and copra pellets may be sold by the group to any existing client fetching a

higher peso value for the copra actually delivered. This scheme, however, is still subject

to risks due to the volatility of CNO-copra prices and needs swift copra consolidation

capacities.


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With coconuts optimized there is still the land underneath the coconut trees to deal

with. With 100-120 coconut trees planted to a hectare, total land area utilized should be

at 20%. A good 80% of the hectare will be open for either multi-cropping or livestock

raising.

Marcus Dumandan, a 3-time PCARRD Awardee as farmer-scientist, won the title for

earning Php 700,000 gross per year with of a hectare of cocoland in Davao City. Marc

optimized his use of the land by planting 6 crops (banana, cacao, durian, coffee,

lanzones, and ginger) underneath his coconut trees. Lately he has added livestock

(chickens) in the farm. Using organic fertilizers for the intercrop had made his coconuts

(cat-lag) more productive as well allowing him to sell his produce as seednuts that again

fetch a higher value than copra.

As many as 1.4 million Filipino adults (aged 20 and above) acquired diabetes in the last

five years mainly because of unhealthy diets and sedentary lifestyles, according to data

compiled by anti-diabetes advocates. [Diabetes Philippines 2009] The increasing number

of cases of diabetes in the country and in the world depict a huge health need for low

glycemic index sugar the coconut sugar. Coconut sugar is derived from the fresh

coconut sap (fresh tuba). In fact, the fresh coconut sap is a healthy drink by itself. A

coconut tree can produce 2-4 liters of this sap per day. Given a fair value in an increasing

market the sap can command Php 8-10 per liter at farmgate or at least a gross of Php

1,600 per hectare per day definitely an amount that copra-making cannot match.

What more if processing is taken all the way to coconut sugar production?

Similar approaches with necessary variations may be made to fit different particular

situations of coconut communities especially with the use of the coco levies. It is


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imperative to undergo a consultative and participative process involving the farmers,

their communities, other stakeholders, and local government to achieve a consolidation

of economic scalesto assure that benefits can accrue to the greatest number.

III. Introduction to the New Fresh Coconut (fresco) Industry

Picking up from the pitfalls of the traditional copra-based industry, the road to the new

coconut industry, with the use of the coco levies, should be anchored on certain Guiding

Principles for Cooperation so that the coconut farmers become participants in and

beneficiaries of the development and growth of the coconut industry.

Guiding Principles for Cooperation:

1. Programs and projects should entail direct community (farmers), otherstakeholders and local government participation in the production and

consolidation of farm produce;

2. Programs and projects should entail value-addition to coconuts thru carefullyplanned integrated processing / semi-processing with technological transfer right

in the areas of production; and,

3. Programs and projects should entail joint ventures, business cooperation and thelike for equity sharing with the target coconut farming communities.

The new fresh coconut (fresco) industry is essentially non-copra-based. The movers of

the fresco industry had proven that copra production utilizes only 25% of the real value

of coconuts. Fresco is a method where fresh mature coconut serves as raw material for

a long chain of interlinked (integrated) processing resulting to various stage-by-stage


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products and by-products capable of being economically feasible in smaller village-level

scales. The products are food-grade and clean as differentiated from the traditional

copra-making. These products, mostly food and oil, would not have to depend on the

international oil market prices for farm-level value. In fact, even the local communities

where processing or semi-processing facilities are positioned can partake of benefits

and consume the healthy food products themselves. Most importantly, the new coconut

industry must be made reachable to the farming communities which they can call their

own. The fresco method integrating uses of the coconuts includes mature coconut

water, fresh meat / coconut milk, coconut shell, husk, and their downstream products

which go a long-long way to flour, non-dairy/non-lactose cream, and virgin coconut oil-

based products (neutraceutical, cosmeceutical, pharmaceutical, and oleochem

products). It can also easily combine with other agri-crops from production to

processing.

IV. Allied Agro-Industries for Coconut Agriculture

Similarly situated with the coconut industry are the coffee and cocoa (cacao) industries

where 90% of the farmers raw material is absorbed by big business allowing them to

dictate prices at the farm gates. In the same light, there is great local and international

demand for coffee and cocoa products. As crops, coffee and cocoa thrive well

underneath the coconuts. As processed / finished consumer products, coffee and cacao

can do wonders when combined with fresco products especially on health and wellness

product lines.


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This perception had led similar-minded industry players to band together under the

Cocoa-Coconut-Coffee Coalition, otherwise known as CO3. CO3 goes by the principles of

shared areas of supply, shared markets, and shared equity where:

Shared areas of supply means coffee and cacao seedlings can easily be grownby the farmers underneath coconuts allowing focused areas for consolidation;

Shared markets means each outlet can serve as satellite of the other,multiplying market access, without having to set up expansion outlets

individually;

Shared Equity grown underneath coconuts and following the fresco approach,processing / semi-processing can be brought to the production areas for all

crops.

The concept is workable on both the BUKOD-KOPRA (multi-cropping) stage or the fresco

stage (integrated processing / semi-processing). But again, the most important factor for

success is the participation of organized coconut communities moving in the direction of

the new fresh coconut industry.

V. Programs with Delivery Mechanisms

A revolting trend in most coco levy-related discussions is the focus on how much is

available and how the funds can be accessed. So far there had been little discussion on

which programs can best serve the situation of the poor coconut farmers; and how such

programs would reach more than 20,000 coconut-producing barangays.


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The fresco method opens up various choices (stages) and opportunities for the poor

coconut famers and farmworkers. Variations to the scheme, however, should be made

to fit particular situations in each setting. While government maintains a steady

bureaucracy, its reach would not go as far as all the 20,000 coconut-producing

barangays in 1,695 municipalities of the 68/79 provinces in the country. As such local

mechanisms will be vital to the success of any project undertaken.

At present there exists a number of Local Coconut Industry Development Councils

(Barangay-Municipal-Provincial) in Quezon, Camarines Norte, Camarines Sur,

Marinduque, Western Samar, Compostela Valley, and Davao Oriental. The LCIDCs are

basically local mechanisms that ensure participation of coconut farmers / farmworkers

and other stakeholders with local governments in planning initiatives to improve the

lives of the sector and the industry in general. By practice the LCIDC is composed of 60%

coconut farmer representation, 20% for other stakeholders and 20% for local

government. The mechanism carries certain inherent advantages:

Inclusivity (entire local geographic community) vs. exclusivity (members only); Industry perspective vs. crop specific; Decentralized / democratized (simultaneous) development initiatives vs.

centralized but limited reach; and,

Farmers (men & women) participation in development vs. farmers limited tobeing raw material producers.

The LCIDCs innate relation to the local government places it in a strategic position to aid

in local legislation for the benefit of the sector and the community. The barangay-level

LCIDC, most especially, maintains direct access to the producer, the farm and the

produce for consolidation.


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All problems besetting the coconut industry impacts on the farms and the farmers. It

follows, therefore, that solutions to the industrys problems should be centered on the

farms and the farmers in the barangays a small farmer centered approach to

sustainable coconut industry development.

The Local Coconut Industry Development Council Concept was adopted by the

Department of Agriculture - Philippine Coconut Authority and the National Anti-Poverty

Commission as part of the institutional reform program. The Department of Interior and

Local Government, thru the late Sec. Jesse Robredo, issued a memorandum to local

governments encouraging them to establish the LCIDCs in all coconut-producing areas.


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Mechanisms like the LCIDCs can play a major role in planning, implementation and

monitoring of initiatives, projects and programs funded by local/ national government.

PProtection of the coconut farms and farmers

Preservation of the coconut trees

Propagation of coconuts and intercrops

Participation of farmer men and women in policy formulation

Planning development for value addition

Putting policy into action

Putting transparency ahead for genuine development

VI. Legal Due Diligence and Third-Party Monitoring for Programs / Projects

Programs and projects to be undertaken, especially with the use of special public funds,

shall necessitate pre and post study / review. Legal due diligence must be performed so

as to aid the coconut farmers in their plight to the new fresh coconut industry

lessening risks of misuse of the funds and/or the actual projects. Local licenses and

permits to operate, regulatory fees by the PCA, and the like must be considered ahead

of the projects to hasten the process.

Among the business models close to the community-level at present are the Barangay

Micro Business Enterprises and the Cooperatives.


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Republic Act No. 9178 November 13, 2002

AN ACT TO PROMOTE THE ESTABLISHMENT OF

BARANGAY MICRO BUSINESS ENTERPRISES (BMBEs), PROVIDING INCENTIVES AND

BENEFITS THEREFOR, AND FOR OTHER PURPOSES.

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled.

PRELIMINARY PROVISIONS

Section 1.Short Title This Act shall be known as the "Barangay Micro Business Enterprises (BMBE's)

Act of 2002."

Section 2.Declaration of Policy It is hereby declared to be the policy of the State to hasten the country's

economic development by encouraging the formation and growth of barangay micro business enterprises

which effectively serve as seedbeds of Filipino entrepreneurial talents, and intergranting those in the

informal sector with the mainstream economy, through the rationalization of bureaucratic restrictions, the

active granting of incentives and benefits to generate much-needed employment and alleviate poverty.

Section 3.Definition of Terms As used in this Act, the following terms shall mean:

(a) "Barangay Micro Business Enterprise," hereinafter referred to as BMBE, refers to any

business entity or enterprise engaged in the production, processing or manufacturing of

products or commodities, including agro-processing, trading and services, whose total

assets including those arising from loans but exclusive of the land on which the particular

business entity's office, plant and equipment are situated, shall not be more than Three

Million Pesos (P3,000,000.00) The Above definition shall be subjected to review and

upward adjustment by the SMED Council, as mandated under Republic Act No. 6977, asamended by Republic Act No. 8289.

For the purpose of this Act, "service" shall exclude those rendered by any one, who is

duly licensed government after having passed a government licensure examination, in

connection with the exercise of one's profession.

(b) "Certificate of Authority" is the certificate issued granting the authority to the

registered BMBE to operate and be entitled to the benefits and privileges accorded

thereto.

(c) "Assets" refers to all kinds of properties, real or personal, owned by the BMBE and

used for the conduct of its business as defined by the SMED Council: Provided, That for

the purpose of exemption from taxes and fees under this Act, this term shall mean all


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kinds of properties, real or personal, owned and/or used by the BMBE for the conduct of

its business as defined by the SMED Council.

(d) "Registration" refers to the inclusion of BMBE in the BMBE Registry of a city or

municipality.

(e) "Financing" refers to all borrowings of the BMBE from all sources after registration.

Republic Act No. 9520

February 17, 2009

AN ACT AMENDING THE COOPERATIVE CODE OF THE PHILIPPINES TO BE KNOWN AS

THE "PHILIPPINE COOPERATIVE CODE OF 2008"

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Articles 1, 2, 3, 4 and 5 of Chapter 1 on General Concepts and Principles of Republic Act No.

6938, otherwise known as the "Cooperative Code of the Philippines," are hereby amended to read as

follows:

CHAPTER I

GENERAL CONCEPTS AND PRINCIPLES

"ARTICLE 1. Title. - This Act shall be known as the "Philippine Cooperative Code of 2008".cralaw

"ART. 2.Declaration of Policy.- It is the declared policy of the State to foster the creation and growth of

cooperatives as a practical vehicle for promoting self-reliance and harnessing people power towards the

attainment of economic development and social justice. The State shall encourage the private sector toundertake the actual formation and organization of cooperatives and shall create an atmosphere that is

conducive to the growth and development of these cooperatives.

"Toward this end, the Government and all its branches, subdivisions, instrumentalities and agencies shall

ensure the provision of technical guidance, financial assistance and other services to enable said

cooperatives to develop into viable and responsive economic enterprises and thereby bring about a strong

cooperative movement that is free from any conditions that might infringe upon the autonomy or

organizational integrity of cooperatives.

"Further, the State recognizes the principle of subsidiarity under which the cooperative sector will initiate

and regulate within its own ranks the promotion and organization, training and reserach, audit and support

services relative to cooperatives with government assistance where necessary.

"ART. 3. General Concepts. - A cooperative is an autonomous and duly registered association of persons,

with a common bond of interest, who have voluntarily joined together to achieve their social, economic,

and cultural needs and aspirations by making equitable contributions to the capital required, patronizing


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their products and services and accepting a fair share of the risks and benefits of the undertaking in

accordance with universally accepted cooperative principles.

While the coconut communities are mainly targeted for programs from the coco levy

funds, business models are not limited to the abovementioned. Business models, such

as corporations / corporatives, should evolve as consolidation for greater volume may

be required by changing markets. All the more shall there be greater need for third-

party monitoring to ensure continuing meaningful impacts of the projects / programs

launched by government with use of the coconut levies.

Third-Party Monitoring may be made with the cooperation of civil society groups (POs-

NGOs, Church, local associations, etc.) fully oriented with the direction of building the

new fresh coconut industry for the small coconut farmers.

VII. Pursuing Further Coco Levy Recovery

The Supreme Court, last January 24, 2012, decided in favor of government and the

coconut farmers when it declared as public funds the investments in the UCPB, CIIF,

14 Holding Companies and the 24% CIIF-SMC shares. The Supreme Court was

emphatic on the specific purpose of said public funds for the use and benefit of the

coconut farmers and the industry -- not for any other purpose! If it had come earlier

than the decision on the 20% SMC shares it would have made it all the more "the

biggest joke to hit the century".

Recently the SC denied the Motion for Reconsideration of Cocofed as regards the

24% CIIF-SMC shares. With this, entry of judgment is expected to come soon and

the decision shall be cloaked with finality.

To whose favor and benefit? In part, the government and, supposedly, the coconut

farmers IF the recovered amounts are handled with a high degree of transparency


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and accountability in accordance with the SC ruling -- only for the benefit of all the

coconut farmers and the development of the coconut industry. Unfortunately,

however, the recent decisions of the Court are still largely for the benefit of SMC

and Danding Cojuangco.

A close look at the history of the SMC acquisitions will show that both blocks were

acquired in 1983 through a mesh of layered transactions specifically designed for

cover up. The 24% CIIF block was purchased by 14 Holding Companies that were set

up by the CIIF Oil Mills, of the UCPB-CIIF Group of Companies, from direct and

indirect loans (not a single loan) from "mother company" UCPB which holds the

Coconut Industry Investment Funds. The 20% block, on the other hand, was

purchased by 44 dummy companies using loans and cash advances from UCPB and

the CIIF Oil Mills. The 44 companies then assigned the shares to Eduardo Cojuangco

Jr. Having control of the two biggest blocks of shares in SMC Cojuangco effortlessly

took the helm of the corporation in 1983.

The use of the coco levies for such purpose was then "legally" backed up by a

Presidential Decree issued by President Marcos creating the Coconut Industry

Investment Fund -- every inch of use of the coco levies granting privileges to

Cojuangco and cohorts were supplied with issuances by Marcos who had sole

legislative powers under martial rule. Cojuangco was indeed a favorite among the

cronies such that when Marcos fled to the US, Cojuangco was by his side. But

wonder of wonders, 7 of the Justices of the Supreme Court needed to be convinced

about Cojuangco being a crony. Claiming to be unconvinced, they granted 20% of

the SMC shares to Cojuangco without blinking an eye, entertaining no motions for


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reconsideration that would prove otherwise, to the extent of deleting them from

the Court's records.

These decisions and the political environment now push the coconut farmers and

its networks into a three-pronged battle for recovery:

Management and utilization of proceeds from the CIIF-SMC preferred shares

Cocofed, the coconut landowners association, attempted to block the SC decision

on the 24% CIIF-SMC shares using the premise that the coco levy funds are owned

in their private capacities and not public funds. After losing the case and with the

funds declared public, Cocofed with its allied organizations the Pambansang

Koalisyon ng mga Magsasaka at Manggagawa sa Niyugan and the Philippine

Association of Small Coconut Farmers Organization then conducted a conference

(Sulo Hotel) to demand from government that they be the selected representatives

of the coconut farmers in managing the now-public coco levy funds.

The Php71 billion cash proceeds, including dividends, are more than enough to

create a chaotic dash of claims and counterclaims even among government

agencies. To add to this is the fact that Malacanang had appointed people close to

Cojuangco in the management and boards of the entire UCPB-CIIF Group of

Companies (Tanada-Magsaysay excluded). This had led to UCPB, Cocolife and the

CIIF Oil Mills signifying to collect "indirect equity" from the said CIIF-SMC shares.

The entire UCPB-CIIF Group of Companies was established using CIIF for capital.

This makes the attempt to collect for "indirect equity" totally absurd. It is merely an


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attempt by the Group of Companies, once more in the control of Cojuangco

lackeys, to shave off as much portion of funds recovered for their own benefit.

Genuine coconut farmer groups have supported bills (HB 5070 / SB 2978)

establishing the COCONUT FARMERS TRUST FUND to protect the funds and ensure

that benefits accrue to the coconut farmers and the industry.

Under such circumstances the Executive Branch should be made to take a position

and make it public.

Recovering losses from the 2009 conversion of the 24% CIIF-SMC shares

The January 24 decision should have really come ahead of the "incredulous"

decision to convert (2009). "Incredulous" was how then Associate Justice Conchita

Carpio-Morales termed the conversion in her dissenting opinion. With a vote of 8,

the Supreme Court did not only permit the PCGG to convert. It practically instructed

PCGG to convert the shares "to preserve the asset", shielding any government

official from any accountability. Right after conversion, value of the SMC common

shares increased to P120 from P56 per share. Apart from surrendering board seats

in SMC, the government lost billions in the process. On the day of redemption by

SMC the common shares ended at Php 109.90 per share. Who then should be made

accountable for such huge losses and how can government minimize such effect?

While the Aquino-PCGG had earlier aired its position taking the Courts to be

mistaken on the conversion, it had kept mum soon after. This pushed the coconut

farmer organizations to file for investigation with the Ombudsman.


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With a very silent national leadership on the issue of the coco levies, the private

intervenors and the coconut farmer groups, while embracing the decision declaring

the nature of the shares to be public, are now left to their own efforts in filing

appropriate cases to recover the huge losses.

Reopening and reviving chances of intervention to recover the 20% SMC

erroneously awarded to ECJ

The Supreme Court may have issued the decision to grant Cojuangco the 20% SMC

shares with finality. But as far as the coconut farmers and the public are concerned,

no null and void decision can ever be declared final. The said decision rested on a

false notion, wittingly or unwittingly, that there exists no legal definition of ill-

gotten wealth and had to redefine it themselves to weave the decision into

granting the privilege to Cojuangco. This despite clear definitions existing by law

(EO Nos. 1,2,14 of Pres. Corazon Aquino) and its use in previous court rulings. In

fact, the definition by law again saw its way into the decision of January 24, 2012

declaring the 24% CIIF-SMC shares to be public. Two blocks of SMC shares which

were both part and parcel of a single case (CC No. 33-F), with monies having both

originated from the CIIF, were treated with two separate applications by 7 of the

Magistrates of the Supreme Court. Worse, the decision even tried to alter history

by claiming that it is of no proven fact that Cojuango was indeed a crony of Mr.

Marcos. The net effect of such an incredible decision was to grant billions of pesos

worth of shares to one individual to the detriment of the millions of impoverished

coconut farmers.


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Last September 19, 2012 the coconut farmer groups with the Catholic Bishops

Conference of the Philippines (CBCP) filed a complaint against the said (20% SMC

shares) decision's ponente, AJ Bersamin, in the Court's Ethics Committee for

discounting the existing legal definition of ill-gotten wealth. Appropriate cases to

reopen the case will have to follow from the private intervenors. Government effort

is yet to be found on this case. Meanwhile more evidences are finding its way to the

public.

Conclusion: The Greater Need for Political Will Now More Than Ever

The fight to recover the coco levies have gone on for more than two decades now.

Every change in the political environment tended to either widen or narrow down


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the opportunities for recovery. Such is the set up wherein Cojuangco is most

comfortable with. Then President Estrada, a patron of Cojuangco, caused PCGG to

withdraw the case on the 24% CIIF-SMC shares which would have set a precedent

for the other cases. Haydee Yorac managed to take the case back in Court when she

took over PCGG thru the appointment of PGMA. But later PGMA herself succumbed

into a political compromise with Cojuangco's Nationalist Peoples Coalition (NPC)

Party to stay in power and evade impeachment. She then appointed Camilo Sabio

to the PCGG to lead an out-of-court settlement with Cojuangco even as

government was winning the cases in the Sandiganbayan. The conversion of the

shares in 2009 was part of this compromise.

Today we face the administration of PNoy whose coming into power was supported

by his Uncle Danding Cojuangco. Last September 23, 2010 Cojuangco and the NPC

publicly vowed to support the administration until 2016. In preparation for the next

elections the Liberal Party had coalesced with the Nationalista Party and the NPC.

PNoy, himself, had been very vocal and firm

Documents

Coco Farmers' Conference Paper_102912