ALMOST half a century ago in this country, there was the coconut levy—a special tax or forcible contribution deducted from the first sale of copra imposed by government through several presidential decrees (PDs), which were implemented from 1972 to 1982. These levies or special taxes were shouldered by all coconut farmers, including tenants and farm workers.
Using some of these levy funds and by order of law (PD 755), a government agency (Philippine Coconut Authority or PCA) purchased an existing bank (First United Bank or FUB) in July 1975 and, from it, established a “new” bank purposely and, quite explicitly, to fulfill the coconut farmers’ financial commitments. The new bank was named the United Coconut Planters Bank or UCPB.
The 72.2 percent of FUB that was purchased by the PCA in order to have a bank that would serve the financial commitments of the coconut farmers had an initial capital of P150, 000,000. Later, the bank became the depository of the coconut levy funds and the administrator of most of these funds—administering almost P3 billion worth of investments in oil milling, oleochemicals, insurance, finance companies and many others with an estimated total value then of some P40 billion.
In 1986, after the Edsa Revolution the government sequestered certain corporations and filed cases seeking to recover certain UCPB shares and certain San Miguel Corp. (SMC) shares widely known to have been acquired by Eduardo “Danding” Cojuangco using the coconut levy funds.
As it appeared, the disputed UCPB shares were registered in the names of more than a million coconut farmers, the Coconut Industry Investment Fund or CIIF companies which were acquired by UCPB using the coconut levy funds, and Cojuangco. On the other hand, the SMC shares were held by the CIIF. The cases for the recovery of the UCPB shares and for the recovery of the SMC shares stayed in court for a long time but were resolved in 2012 as “owned by government for the benefit of all coconut farmers and for the development of the coconut industry.”
Were there no changes in the distribution ratios of equity participation in the bank? In fact, yes, there was and this is evidenced by five phases of distribution ratios from before sequestration in 1986 up to the time of the final Court decision in 2012.
In Phase I (1975), government (PCA) acquired 72 percent of the private FUB shares using coco levy (CCSF) funds. The remaining 28 percent stayed with other (including original) private owners.
In Phase II (1975), changes occurred due to additional coco levy fund infusions and because of shares acquired by Cojuangco. Government increased its share for farmers from 144,000 to 548,700 shares while the other owners increased theirs from 56,155 to 213,393, such that the distribution ratio was still 72 percent belonging to government-for-farmers and 28 percent to other owners. Also in this phase, however, Cojuangco took out from the farmers’ side his controversial 10-percent commission, which now gave him 7.2 percent of total equity while that of government (PCA)-for-farmers would be reduced to 64.8 percent—a most controversial change, indeed, in the eyes of many. The other owners retained their 28 percent.
In Phase III (1976), after only a brief time of operation the bank reported new ratios in the equity structure. The PCA-for-farmers now stood at only 51.8 percent; so-called Farmers’ Companies (Cocolife and CIIF oil mills) had 6.32 percent while Cojuangco’s went up to 17.77 percent and the other stockholders now had 24.11 percent.
In Phase IV or the subsequent years up to 1986, following certain operations of UCPB and COCOFED on the coconut farmers, the equity structure changed into a mere 24.91 percent for farmers, 6.32 percent for Cocolife and the oil mills, 17.77 percent for Cojuangco and companies, while “other” stockholders now controlled 51.00 percent. At this phase, Cojuangco was deemed directly and indirectly in full control of the bank ownership.
In Phase V (2012 to date), a sea of change occurred. After a quarter-century of court battles the Supreme Court decided that the bank must be recognized as 100 percent government-for-farmers-owned: “owned by government for the benefit of all coconut farmers and for the development of the coconut industry”—100 percent, believe it or not. And the High Court was clear that it was proclaiming a decision that was final. It would, therefore, entertain no motions for reconsideration. But, of course, motions went up anyway, not “for reconsideration” but “for clarification.”
Whatever happens, one court doctrine is quite clear, namely, that the government is Trust Owner of the coco levy funds, including the coco-levy-funded UCPB while the True Beneficial Owners are all the coconut farmers. So, the question now is: Does government-for-farmers want to sell the UCPB? Do the farmers? Should not the two of them decide together instead of only the former dictating on the latter?
On the pretext that the bank needs to recapitalize pursuant to Central Bank demands following the Basel Protocol for Universal Commercial Banks, Trust Owner government wants to sell. In May 2015, government, in fact, released bid invitations for 73.9 percent stake in UCPB, which True Beneficial Owner Farmers frustrated by obtaining a TRO from the Supreme Court—an order that holds up to now like a quasi-permanent injunction.
The government is Trust Owner of 1.11 billion common shares or 73.9 percent of 1.5 billion total outstanding shares. It was asking for the bare minimum price of P1/share of this stake. It was also requiring P15 billion in recapitalization through subscription of up to 37.2 billion primary common shares at minimum subscription price of P1 per share. Bids would be evaluated based on the sum of the offers for the 73.9 percent stake and subscription to the primary common shares.
But here comes the important nota. Subscription of the winning bidder to the primary shares will be subject to preemptive rights of pre-transaction shareholders (meaning, Cojuangco). The winner would be required to make an offer to buy the shares of the pre-transaction shareholders.
The True Beneficial Owners accept that there may be a need to recapitalize the UCPB, to be in line with the requirements of the Bangko Sentral ng Pilipinas (BSP) following the Basel protocol. Nonetheless, UCPB can be recapitalized by the fund, now about to come out of Congress, as soon as an acceptable bill is agreed on between farmers and Congress. Why can’t BSP and Finance be more liberal and flexible for the farmers’ interests, especially in the wake of a clear Court doctrine that the farmers are the beneficial owners of the coco levy fund, and we have a new government that can really push for the passage of a pro-farmer bill?
To sell (privatize) UCPB just when it is already doing very well, making a net income of more than P3.5 billion per annum, makes no sense at all as far as the farmers are concerned. Of course UCPB, understandably, because it already has quite a history, is really quite attractive for privateers. But who does the new government really serve—these richer few or the majority farmers for whose interest the bank was established by their own money in the first place?
The attractiveness of the bank was shown last year by so many local and international banks desiring to bid. UCPB is the ninth largest domestic bank with P270 billion in assets. Its net income in 2014 was P3.13 billion and, in 2015, P3.5 billion. It has 226 branches of which 116 are in Metro Manila. Banks pay P20 million in licensing fees for branches in restricted Metro Manila areas.
But, to reiterate the farmers’ view, UCPB can be recapitalized, if need be, with government-for-farmers’ funds, viz., the coco levy funds and, at the same time, be brought around to becoming at least in part the agribank that it has never been but which it was intended to be by its original law—a law that is still extant and has never been abrogated.
UCPB is now a universal bank. A universal bank is different from an agribank or a farmers’ bank. As “Unibank” it could not become a farmers’ bank but a bank for use by the richer sectors of society. To the eyes of a universal bank, farmers are not bankable. Period.
The farmers, therefore, reiterate their position that it is imperative for government (Department of Finance) and UCPB to acquire or install, purchase or in any other way establish for the coconut farmers their own farmers’ bank composed of a Board of Trustees from the farmers themselves and run by professionals to meet the farmers’ banking needs in timely fashion. The new government should immediately organize a Technical Working Group to tackle the details of organizing such a farmers’ bank. They must not start the bids for recapitalization until the farmers’ bank is safely in place. They cannot do so in any case, even if they wanted to, because the Court does not allow them to. The government, of course, can always confidently sit down with petitioner-farmers (the CONFED) in this regard as the majority of them are from Mindanao, anyway. Finally, expect the farmers to keep harping on the most basic question of the new government: Who do you really want to serve—the majority of us, farmers, or only the richer few?