Optimum coco levy fund utilization


The Supreme Court has spoken with finality after dribbling the coconut levy ball for decades to the detriment of the lowly coconut farmers who were thus deprived of the use of funds extracted from them by Marcos edicts. These levies coming from the blood, sweat and tears of alienated and impoverished coconut farmers were leveraged by its handlers to produce whopping fortunes for themselves without leaving any crumbs for its true owners.

And now the industry is awash with money creating a mad scramble for its use among government entities acting like hungry dogs over a piece of meat. Unless properly managed this could easily produce a moral hazard—defined as the propensity of government to indulge in a spending orgy that will not redound to the interest of the beneficial owners of the fund—the coconut industry. Alternatively this bonanza could give way to the Dutch Disease, a situation occurring in the Netherlands upon the discovery of the North Sea gas which instead of favoring the economy led to negative consequences as the newly-discovered wealth was frittered away in less than economically productive undertakings.

What is therefore a must at this time is to immediately preserve the integrity of the funds by creating an agency to manage the funds which are trust funds intended to benefit the coconut industry. As a special fund with fiduciary features, it cannot be part of the general fund or co-mingled with budgets of government agencies or instrumentalities, however related closely or remotely with the development of this agriculture sub-sector.

Necessarily no less than an act of Congress is needed to determine the qualifications of the managers of the trust funds who should be tenured with recognized competence in such expertise as productivity, technology, marketing, finance and research. Since a few bills have already been filed along these lines it is suggested that this be consolidated into an omnibus bill.

Since we are looking at a big amount—some P70 billion in financials assets and probably the same amount in fixed assets, a budgetary plan can be drawn up which will utilize the earnings of the fund for both operating and capital expenditures. The industry should be run like a corporation as in the case of the Malaysian palm oil industry.

Perhaps this is an opportune time to revisit the development pattern; the copra culture has to go. This is a legacy of colonial policies that wanted to keep the archipelago as a supplier of raw materials so that multinationals could keep value added income to themselves. On this score it has been shown that the level of technology in this country enables it, with government support in terms of infrastructure and research to promote the agro-industrialization of the coconut sector. This will surely create higher levels of productivity, income and employment in rural areas and alleviate the poverty situation now concentrated in coconut areas.

Priority spending of levy funds is clearly in the productivity and marketing areas which will involve replanting and rehabilitation of coconut farms now in a menopausal state if not suspended animation. A more efficient input/output delivery system will make for more efficient supply chain, and remove the layers of middlemen—the leeches in the industry, who live off the backs of coconut farmers who are ground between the millstone of low productivity and the grindstone of low prices. Further processing of the products of the ‘tree of life” will give life to cottage and small scale industries producing anything from coco-fiber to coco-charcoal and from buko juice to coco sugar etc.

A social fund to take care of farmer education, technical training and hospitalization, insurance etc. is a must. Last but not the least is a fund for social preparation to transform individual farmers into farm cooperatives so that they can enjoy the benefits of the economies of scale.

The idea is to transform coconut farmers into “total” farmers who can manage intercropped farms which will optimize the use of sparsely developed coconut farms. Whereas these farmers only harvested coconut and processed them into copra, under a vertically and horizontally integrated system, they will also be growing such products as coffee, cacao, pineapple, vegetables and even go into cattle raising under coconut trees.

What would be ideal is to develop Coconut Agro-industrial Estates under the Philippine Economic Zone Authority to allow these to benefit from tax incentives and attract local as well as foreign investments. These could accommodate processing plants and produce employment and better incomes.


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