Pass the coconut levy trust fund now!



(First of 2 parts)
AFTER dribbling the levy fund issue for decades, the Supreme Court has spoken, depriving the coconut industry and its farmers of no less than P25 billion in levy funds. Many of us in the industry cannot be convinced that these funds did not emanate, albeit indirectly, from government taxes levied on the farmers. But who are we to contest the decision of the mighty court. All we can do is gnash our teeth in the dark and hope that at the very least the government will now release the balance of the fund for the use of the industry which has been denied justice for far too long.

It was in the early 1970s that the petroleum-producing countries decided to form the cartel OPEC. As a result, energy prices hit the roof and brought in its midst soaring prices for the world’s commodities, including coconut products. Seeing this development, the government, at the behest of coconut hacenderos and refiners who wanted stable prices to protect their market, called for a levy on copra through a series of presidential decrees.

While the coconut hacenderos “managed” the funds, earning for themselves high positions in cocolevy-funded enterprises, the refiners greedily passed this on to the hapless copra producer. While world prices remained high, the copreros did not feel much pain. But then petroleum prices collapsed a few years later when the demand for fuel declined but the levies remained. In fact, more levies were exacted. That was almost half a century ago and the result was the pauperization of the coconut farmers even as the beneficiaries of the levies, the so-called coco cronies, prospered dramatically.

The situation post-EDSA

After EDSA, when the cronies were marginalized by the new administration, there was a call to action to redeem the farmers from poverty. The executive, through the Presidential Commission on Good Government (PCGG) went after the cronies and decades later the judiciary spoke and ordered the return of levy funds to the government acting as proxy for the industry. But thanks to the cronies’ “abogados de campanilla” and their legal maneuverings, the funds remained with them to this day despite court orders for the reconveyance of the same to the industry.

With justice delayed which is justice denied, Congress is now at bat. A coconut levy trust fund has been passed by the lower house and is now in the hands of the upper chamber. This is the litmus test for the sincerity of this administration which promised to deploy said funds for the benefit of the industry.

We dare say that the bill now pending in Congress—the Coconut Trust Fund—is the answer to the needs of the industry, Heretofore the industry had to outsource most of its research and development requirements given that the Philippine Coconut Authority (PCA), the principal agency for coco industry development, is basically a regulatory body with scarce resources devoted to other requirement of the industry. While it may be true that it has its Davao and Zamboanga R & D facilities, this is woefully inadequate to launch the industry into the high value market for coco products in the world and produce its comparative advantage over other fats and oils. Moreover, its marketing research and marketing drive is constrained by a meager staff which is basically a statistical arm. In stark contrast, the Primary Industry Ministry of Malaysia has marketing offices all over the world devoted to selling palm oil products.

Finally, the PCA, an attached agency of the Department of Agriculture, has no banking license and cannot be a depository or held accountable for the billions of coconut levy funds–the reason why initially the cocolevy was deposited with government financial institutions like the Philippine National Bank (PNB) and the National Investment and Development Corp. (NIDC) before the funds were hijacked by the privately owned United Coconut Planters Bank (UCPB). There are other shortcomings in the present set-up which can be remedied by the pending bill in Congress which, modesty aside, we had the honor of helping to draft by virtue of our exposure gained and experience in the industry in and out of government.

Duterte campaign promise

This administration made a campaign promise to resolve the cocofund issue so that it could be utilized to promote the optimum level of productivity, income and employment for an industry on which perhaps a fourth of the Philippines’ population depend for survival.

Accounting for over a third of all agricultural lands in some 70 provinces, this agricultural subsector has the potential of absorbing half of the unemployed in this country, the bulk of whom are found in the countryside.

This administration which is headed by a Davaoeño should fully support the bill in Congress given the fact that Mindanao accounts for about half of all coconuts produced and Davao alone about half of this half. So, in terms of economic well-being, this has a huge impact on the inhabitants of the southern isle.

As we write, the cocolevy fund issue being discussed in Congress centers on the establishment of a Perpetual
Trust Fund devoted to the accelerated development of the industry and its millions of stakeholders. Unlike in the past when the proceeds of the fund were mostly appropriated by a few, the pending bill envisions the optimal distribution of the same. To accomplish this vision, we recommend the adoption of the following strategies: 1) review of development parameters; and 2) policy review.

1. Review of development parameters

There is need for a development paradigm shift. Past development efforts to attain income equity have failed dismally because the coconut sector is still characterized by a highly skewed distribution of income. To arrest the potentially inequitable situation, government should now spearhead the restructuring of policies for economic growth. It should emphasize that from now on priority will be to ensure that the benefits of growth shall accrue to small coconut farmers, farm workers and coco-based entrepreneurs, who should become the primary determinants and benefits of policies affecting the coconut industry.

There is need to reverse past policies which have interdicted the growth process of the industry. The mindset, the development philosophy and paradigms implanted by coconut crony capitalists must be substituted for by farmer-friendly reforms aimed at increasing the levels of productivity, incomes and employment in the coconut farms through vertical farm integration and product diversification. Monocropping must give way to multi-cropping, subsistence farming to cooperativism. With the call for an increase in Buko Pie (productivity, income and employment), the new policy must be farm-focused, rather than product-centered.

The underlying principle of a new development concept is growth with equity in a free market environment. This means ending the regime of imperfect competition and redistributing income by giving preferential option to the 30 percent of the farming population mostly engaged in coconut communities.

An industrial restructuring is the sine qua non for promoting higher levels of productivity, income and employment in the coconut sector. There is need to focus on small coconut farmers, farm workers and coco-based entrepreneurs. Its basic mandate must be to improve the quality of life in the coconut communities.
The rationale for government intervention in coconut industry development today is still valid.

It must be realized that coconut farming in this country is predominantly a subsistence farming operation which hampers the farmers’ efforts at obtaining services for production otherwise available to large-scale undertakings, as well as the necessary credit, placing him at a disadvantage vis-à-vis the middlemen. It must also be borne in mind that historically, agricultural prices and profits often fluctuate violently, as supply fails to adjust itself to demand in the short run.

The government must provide an efficient and affordable input delivery system. This includes the provisions of farm machinery, the purchase of requisites such as fertilizers and feeding stuff at bulk prices, the organization of societies for fledgling producers, cooperative credit facilities to obtain capital on cheaper terms, and economies of large-scale production. The government must either provide these services itself or encourage and assist cooperative societies to supply them, thus improving and making more efficient this input-delivery system to the farms.

Two chief methods have been adopted in normal times to make this possible. First, in many countries, governments have encouraged cooperative marketing associations in order to put producers on a bargaining equality with distributors. In some countries, such producers’ organizations have been given compulsory powers over recalcitrant minorities as in the case of the Australian marketing boards. Secondly, direct efforts have been made to prevent monopolistic and restrictive practices, which operate against the public interest. Various countries have passed different laws with this aim. Also, the state has often prescribed standards of quality for various grades of produce, so that consumers will know what they are getting and pass their preferences to producers.

In sum, the full benefits of small-scale agricultural development cannot be realized unless government support systems are created that provide the necessary incentives, economic opportunities, and access to needed inputs to enable small cultivators to expand their output and raise productivity.

This is likely to be ineffective, however and perhaps even counter-productive, unless there are corresponding changes in rural institutions that control production (e.g., banks, moneylenders, seed and fertilizer distributors), in supporting government aid services (e.g., technical and educational extension services, public credit agencies, storage and marketing facilities, rural transport and feeder roads), removing factor-price distortions, and outputs (paying market-value prices to farmers).

The author is a former chairman of the Philippine Coconut Authority

(To be concluded tomorrow)


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