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/ 2

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Coconut Industry Reform Movement, Inc.
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 standards 1 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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receipts 2 . 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 2004

USD 841 M
Copra, 2.00%
Copra Meal,
3.60% Coconut Oil,
Oleochem, 67.30%
5.70%
Others,
9.70%
Desiccated
Coconut,
11.70%
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)

VOLUME VALUE PRICE
YEAR
(MT) (Million US$) (US$/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
Volume Value Volume Value
Commodity
(MT) (USD FOB) (MT) (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
5 31,239 10 22,078
Concentrate
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
Production
Year
(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.
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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 Ave. Members Total Total Filipino Percent
/ Farm Workers per Family Population
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 Tenant Farmers Small Owner Traders / Landlords
Workers Farmers Industrial
Workers
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 price 3 .
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.”

Executive Director
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

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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 quarter 4 .
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

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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

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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

Executive Director
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),

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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 farmers 6 .
Table 5. Malacañang press release on Php 700 M fund allocation

BENEFICIARIES ALLOCATION
PROGRAM
TARGET INDIVIDUAL PROGRAM INDIVIDUAL
Women in
Buklod-Unlad Program
coco 18,000 100M 5,555.55
(BUKO)
households
Organized
MaTuTuPad Lending
coco farmer 300M 10,000.00
Program 30,000
groups / Coops
Farm Diversification Individual 200M
60,000 3,333.33
Program farmers
100M
Direct Copra Marketing Cooperatives 56,000 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
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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 funds 7 .
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 mandate 8 .
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:
Executive Director
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.

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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.
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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.

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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?

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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
Executive Director
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
9
after administration.
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 450MTD 153MTY 650MTD 221MTY
De Oro
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:

Executive Director
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.

Executive Director
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

Executive Director
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

Executive Director
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.
Executive Director
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.

Executive Director
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 Coco Fund Levy

(1973 – 1982) (1971 – 1981)
Amount of automatic deduction Ave: Php 60/100k Php 0.55/100k
from copra prices On the first sale 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
Coco Fund Receipts issued
issued by PCA to the
to the copra producer
millers upon remittance

Executive Director
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 %
UCPB 4,753,321,845.13 49.03
1) Coconut Industry 2,572,143,884.69 26.53
Investment Fund (CIIF)
2) Insurance Fund 994,941,396.29 10.26
3) Debt Service Fund 38,970,509.40 0.40
Development Fund (CIDF)
PCA 2,818,167,904.31 29.07
1) Subsidy 2,147,207,603.38 22.15
2) PCA Research & 242,892,132.30 2.51
Development
3) Premium Duty 173,142,231.78 1.79
4) Additional Equity on UCPB 80,864,000.00 0.83
5) Fertilizer Distribution 52,521,977.03 0.54
Program
6) Donation to Children’s 50,000,000.00 0.52
Hospital
7) Ang Tahanang Maharlika 40,000,000.00 0.4
8) Acquisition Price of 28,880,000.00 0.30
Controlling Equity Interest
9) Hagemaier Aqueous 2,659,959.82 0.03
Coconut Processing Project
COCOFED 905,528,789.29 9.34
1) Dist’n of Stock Cert of 694,833.81 0.01
UCPB to Coco Farmers
2) Copra Price Stabilization 144,922,064.14 1.49
Fund (CPSF)
3) Development and Socio- 759,911,891.34 7.84
Economic Projects for
Coconut Farmers
Others 1,218,511,210.94 12.57
1) Census Committee 3 23,000,000.00 0.24
Rationalization Fund
(UNICOM -Administered)
3) Subscription Deposit (Per 5,776,000.00 0.06
PCA and COA Report)
Total 100

Executive Director
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.
CIIF
CCSF Total: Php 9.695 Billion P 2.57 B
Administered by:
Non-UCPB
(PCA, Cocofed,
atbp.)
- UCPB P 4.776 B P 4.919 B CIDF
(Replanting)
- Non-UCPB P 4.919 B P 1.15 B
Insurance
P 0.99 B
Debt Service
P 0.04 B
Census Fund
P 0.03 B

Executive Director
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 million hybrid coconut seedlings to PCA/UCPB for a period of 5
years costing some P980 M from the coco levy fund. The coconut
seedlings were to be distributed to coconut farmers for free.
The contract stipulated that upon signing, P500 M shall be

advanced to A.I.I., interest free, and that in the event that UCPB stops
buying during the 5-year period, UCPB will be penalized to pay the
entire 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 UCPB in the

amount of Php 127 million.
PD 414: The Coconut Industry Investment Fund (CIIF)

Executive Director
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 coconut farmers”.
FIRMS BOUGHT WITH THE CIIF

Name of Firm Amount
United Coconut Chemicals Inc. (UNICHEM) 864 M
United Coconut Planters International (UCPI) 147 M
OIL MILLS:
United Coconut Oil Mills (UNICOM) 544 M
Granexport Mfg. Corp. 246 M
Legaspi Oil Company 210 M
San Pablo Manufacturing Corp. 43 M
Iligan Bay Express Corporation (Shipping) 9M
United Coconut Planters Life Assurance Corp. (COCOLIFE) 16 M
United 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
Lamon Bay Agricultural Commodities, Inc. 10 M
Mactan Agricultural Commodities, Inc. 10 M
Maopay Agricultural Commodities, Inc. 10 M
Malipayon Agricultural Commodities, Inc. 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 Report 1986
This gave way to yet another conglomerate, the United Coconut Oil
Mills (UNICOM). UNICOM served well the purposes of those who
managed it but not the industry as a whole. Marcos later issued an
Executive Order 11 allowing only UNICOM to export coconut oil. In
1983, another Presidential Decree granted sole rights to the
Cojuangco-owned UNICHEM to import petrochemical materials for use
in its products.

Executive Director
The acquisitions made by UCPB consolidated the coconut
monopoly from hauling, transport and shipping, milling and processing,
marketing and international trading.
D) SAN MIGUEL CORPORATION AND THE CIIF
Acquisitions did not stop at completing the coconut monopoly. In

1983 the CIIF found its way into the San Miguel Corporation through
the 14 Holding Companies. The 14 Holding Companies are owned by
the 10 Copra Trading Companies, which are in turn owned by the CIIF
Oil Mills, which are owned by UCPB.
The Soriano Group in SMC decided to sell their 33,133,266 shares

at Php 50 per share in 1983. In order to acquire these the five CIIF Oil
Mills obtained a loan from UCPB in the amount of Php 976 million. Out
of the loan Php 276 million was invested in the equity stock of the 14
Holding Companies. The remaining Php 729 million was farmed out as
loan to the Holding Companies.
Having its own capital

structure from the CIIF Oil Mills,
the 14 Holding Companies
secured a loan directly from
UCPB in the amount of Php 680
million. Thus, availing
themselves of a total of Php
1.656 billion – the exact amount
of the SMC shares for sale.
Notably a number of the

Executive Director
corporate names of the 14 Holding Companies were patterned after
the initials of senior partners of the Angara, Concepcion, Cruz, Regala,
Abello (ACCRA) Law Firm. 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. Drilon
Franklin M. Drilon and Raul S. Roco admitted their involvement in

the sale of the 33.1 million shares of SMC in 1983 but claimed to have
no personal knowledge of and involvement in any of the transactions of
the said companies 13 .
Yet another block of SMC shares were purchased by 44 companies

through a loan from UCPB and
CIIF Oil Mills UCPB the CIIF Oil MIlls. The
Lo companies are closely related

an an
Lo
to Eduardo Cojuangco, Jr. who
consequently was handed its
44
Companies voting trust agreement for 18%
Silver-leaf Plantations, Inc. of the SMC shares.
Meadow-Lark Plantations, 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
18% SMC shares Chairman in 1983.

(ECJ-SMC Block)

Executive Director
E) THE INTERLOCKING DIRECTORATE
Decisions and business transactions were easily undertaken

through an interlocking directorate that governed 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
PCA COCOFED UCPB UNICOM
Enrile Enrile Enrile Enrile

(1975)
Chairperson dela Cuesta
(1978)
President Lobregat C ojuangco Cojuangco
Lobregat
Eleazar Lobregat
BoD Eleazar
Cojuangco dela Cuesta de la Cuesta
Lobregat Eleazar Concepcion Concepcion
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
development in SMC, UNICOM, UCPB’s commercial banking, Bugsuk
Seed Garden and other business ventures where Cojuangco is head
or president.

Executive Director
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 funds.
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 parent 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) LEVIES SUSPENDED AS THE MONOPOLY TOOK OVER
The levy was eventually “lifted” 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
farmers to the millers and exporters. However, Marcos and Cojuangco
knew and saw to it that the market structure passed on the economic
burden of paying the tax back to the farmers. 14
Marcos tried to cloak the coco levy from the ire of the coconut
farmers and the general public. In 1976, P.D. 961 worded the levy “to
come from copra exporters, oil millers, dessicators, and other end-
users of copra.”
Executive Director
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.
However, the same PD imposed a substitute levy to continue the

government’s “developmental projects.” Collected from 17 June 1980
to 09 September 1981, the money collected was used for “price
supports” to the United Coconut oil Mills (UNICOM). 15
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
coconut farmers. This so-called “end-users” merely shifted back the
economic burden of the levy to the coconut farmers who were paid the
copra price with levy deducted.
The poor coconut farmers were selling their copra to the traders at
less than 25% ensuring the cartel of net profits of more than 75% of
the world market price.
G) STATUS OF THE CIIF
Unlike in the case of the Marcos ill-gotten wealth which was

funneled out of the country and deposited in Swiss banks, the assets
bought with the coco levies remained intact in the country except for
those that had been dissolved or declared insolvent. These are what
the PCGG intends to recover.

Executive Director
The assets invested in by the more than Php 2 billion (CIIF) have
grown enormously through the years. The estimated amount of the
investment today runs over Php 100 billion.
Investments Original Estimated Equity

(December 2004)
Oil Milling Companies, 10 CTCs, Subsidiaries Php 733 M Php 34,800 M
Oleochemicals (Cocochem) 864 M 2,400 M
Trading Company (UCPI-France) 148 M 1,050 M
Insurance Company (Cocolife) 16 M 1,500 M
Barging Company (IBEC) 9M 20 M
Others (Dissolved Companies-1985-1990) 802 M 0
Unicom, Cacao Plantation, Management
Company
UCPB/CIIF Finance 0 1,100 M
Combined 2,572 M Php 40,870 M
Equity at Traded Value of CIIF-SMC Block Php 59,870 M
Note that the CIIF-SMC block is included with the UCPB-CIIF

Group as ownership is that of the CIIF Oil Mills.
During the course of operations several of the companies within the

Group established its own subsidiaries. The subsidiaries, as well, form
an integral part of the coco levies.
Equity (December
Subsidiary Parent % Ownership
2004)
Granex USA (New Granexport Mfg. Co. 100% Php 250 M
Jersey)
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
to recover the coco levies.
San Miguel Corporation Shares

Amount
from the Coco Levy
CIIF Block Php 50 B (min.)
ECJ Block 37 B (min.)
Total Php 87 B (min.)

Executive Director
H) STATUS OF COCO LEVY RELATED CASES
Since 1987 a barrage of court cases was filed against Cojuangco

and his associates. The cases were spread in the Supreme Court and
the Sandiganbayan, the anti-graft court. The numerous cases were
based on eight main arguments that are reflected in the civil cases filed
in the Sandiganbayan.
CIVIL CASE NO. 0033-A

Re: Anomalous purchase and use of First United Coconut,
now United Coconut Planters Bank (UCPB)
Defendant Eduardo M. Cojuangco, Jr. manipulated, beginning

the year 1975, with the active collaboration of defendants Juan
Ponce Enrile, Ma. Clara Lobregat, Danilo Ursua, Jose R.
Eleazar, Jr. and Hermenegildo C. Zayco, the purchase by the
Philippine Coconut Authority (PCA) of 72.2% of the outstanding
capital stock of the First United Bank (FUB), which was
subsequently converted into a universal bank named United
Coconut Planters Bank (UCPB) through the use of the Coconut
Consumers Stabilization Fund (CCSF) being initially in the
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 anomalous
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 funded

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

Executive Director
as the Philippine Coconut Producers Federation, Inc.
(COCOFED), Coconut Investment Company (CIC), COCOFED
Marketing Corporation (COCOMARK), and the United Coconut
Planters Life Insurance Corporation (COCOLIFE), with the
active collaboration and participation of other defendants
including Juan Ponce Enrile, Ma. Clara Lobregat, Jose Eleazar,
Jr., Iñaki Mendezona, Danilo Ursua and Hermenegildo Zayco,
most of whom comprised the interlocking officers and directors
of said companies; dissipated, misused and/or misappropriated
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 cash
advances in millions of pesos which remain unliquidated and
accounted for, to the prejudice of plaintiff and the Filipino
people.
CIVIL CASE NO. 0033-C

Re: Creation and operation of Bugsuk Project and award of
P 988 million damages to Agricultural Investors, Inc.
Defendant Eduardo M. Cojuangco, Jr. misappropriated,

misused and dissipated P 840 million of the Coconut Industry
Development Funds (CIDF) levy funds deposited with the
National Industry Development Corporation (NIDC) as
administrator – trustee of said funds and later with UCPB, of
which said defendant was Chief Executive Officer in connection
with the (i) development, improvement, operation and
maintenance of Bugsuk Island Seed Garden (“Bugsuk”) with
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 PCA of

Executive Director
the seednuts produced at Bugsuk at exorbitant prices, and (iii)
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 Arbitration
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 caused

to be funded with coconut levy funds, with the active
collaboration of defendants Ferdinand E. Marcos through the
issuance of LOI926, and of defendants Juan Ponce Enrile, Jose
R. Eleazar, Jr. Ma. Clara Lobregat, Jose C. Concepcion, Iñaki
Mendezona, Douglas Lu Ym and Teodoro D. Regala,
Emmanuel Almeda, Eduardo Escueta, Leo Palma and Rolando
de la Cuesta, the United Coconut Oil Mills, Inc. (UNICOM), a
corporation basically held and controlled by defendant Eduardo
M. Cojuangco, Jr., and bought sixteen competing and/or non-
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 and
approval of defendant Ferdinand E. Marcos, thereby
establishing a coconut monopoly for their own benefit and unjust
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 and

Executive Director
Teodoro D. Regala, the sale of the Mindanao Coconut Oil Mills
(MINCOCO) to UNICOM through the assistance of LOI by
defendant Ferdinand E. Marcos, in violation of the Guaranty
Agreement dated July 23, 1976, which prohibited the sale,
among others, of the MINCOCO assets/properties without the
prior written consent of NIDC, under terms and conditions
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, namely,
the National Investment Development Corporation (NIDC),
development Bank of the Philippines (DBP), and the Philippine
Veterans Bank (PVB), under terms grossly disadvantageous to
plaintiff.
CIVIL CASE NO. 0033-E

Re: Unlawful disbursements and dissipation of coco levy
funds.
Defendant Eduardo M. Cojuangco, Jr. misappropriated and

dissipated the coconut levy funds by withdrawing therefrom tens
of millions of pesos in order to pay damages adjudged against
UNICOM, headed and controlled by said defendant, in an anti-
trust suit in California, USA.
Defendant Eduardo M. Cojuangco, Jr. misused, dissipated and

unlawfully disbursed coconut levy funds with the active
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

Executive Director
Imelda R. Marcos, and for purposes completely alien to those
for which the fund was created, among which are the various
donations made by PCA such as the amount of P400,000.00
and P10 million for the social services and health and medical
assistance projects of Mrs. Imelda R. Marcos; P125,000.00 for
the yearly Malacañang Pasko project; P10 million to the Cultural
center of the Philippines; P5 million to the Philippine Youth
Health and Special Center; P50 million for the construction of
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 Faculty
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 levy

funds to buy out to majority of the outstanding shares of stock of
San Miguel Corporation in order to control the largest agri-
business, food and beverage company in the Philippines.
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 Pepsi

Executive Director
Cola, to implement his scheme to monopolize the softdrinks
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., Don Ferry, Alicia Ll. Reyes
and Rolando M. Zosa, all members of the Board of Governors of
the DBP, huge loans and credit privileges from the DBP in the
aggregate amount of P 603,343,470.00 for the use and benefit
of the Northern Cement Corporation, a corporation beneficially
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 the
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. Cojuangco, Jr. under terms and conditions grossly
disadvantageous to DBP, plaintiff and the Filipino people.
Defendant Eduardo M. Cojuangco, Jr. obtained, in October

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 70
million from the Philippine Tourism Authority in favor of the
Holiday Village Philippines, Inc., and Coral Island Resort and
Executive Director
Development Corporation, a corporation beneficially held and
controlled by defendants Manuel “Manda” Elizalde, Jr., Jose D.
Aspiras, and Eduardo M. Cojuangco, Jr., to finance a village
resort complex at San Juan, Batangas, which never
materialized.
The civil cases reflect the anomalous transactions made and

entered into by Cojuangco and his associates. The matter of the nature
of the coconut levies were left to the Supreme Court. Fifteen years
passed before a conclusive decision was rendered by the Courts on
just the nature of the coco levy funds. While other cases are still
pending until today, certain major cases have seen favorable
resolution.
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.
1. The December 14, 2001 Supreme Court decision
The Supreme Court decision of 14 December 2001 (Republic of

the Philippines versus Cocofed, et. al., G.R. Nos. 147062-64) gave
way to a more favorable and explicit interpretation of the coconut
farmers’ battle to recover the multi-billion coco levy funded assets.
The legal implications of the decision directly affect the resolution of
three (3) major civil cases pending in the Sandiganbayan, the anti-
graft Court: Civil Case Nos. 0033 – A, B and F.

Executive Director
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)

assets rest lawfully with the Philippine Commission on Good
Government and not with those appearing in the stockholders’
list;
b. That the coco levy funds were collected for a specific purpose
for which it should be utilized;
c. That the burden of proof to show that they are private funds lies
with Cojuangco, Cocofed et.al. and not government; and,
d. That the Sandiganbayan shall determine “true ownership” of the

sequestered (coco levy funded) assets within 6 months
following the SC decision.
Note that the SC did not rule on the actual ownership issue but was
explicit on the issue of who has the rightful voting rights to the
corporations. Whether the said assets were bought using coco levy
funds or private funds from Cojuangco et. al. is a question of fact that
falls within the jurisdiction of the Sandiganbayan. This same decision,
however, also denied the petition for intervention of coconut farmer
groups since government is already representing the farmers.

Executive Director
2. 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
shares in the bank;
b. That the distribution of shares of the bank lacked just basis and,
therefore, nullified;
c. That certain sections of PD No. 755 that declared “shares to be

owned in private capacities” are unconstitutional and
inconsistent with the mandate to which coco levy was collected;
d. That the bank was acquired with coco levy funds and, therefore,
declared government as the beneficial owner of UCPB.
3. The May 7, 2004 Sandiganbayan decision
In another decision on a Partial Summary Judgment involving Civil

Case No. 0033 – F, specifically dealing with 27% SMC-CIIF shares,
the Sandiganbayan ruled:
a. That the CIIF Companies (SOLCOM, CAGOIL, ILICOCO,

SPMC, GRANEX, LEGOIL);

Executive Director
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
increments thereto arising from, but not limited to, exercise of
pre-emptive rights;
ARE DECLARED OWNED BY THE GOVERNMENT IN TRUST

FOR ALL THE COCONUT FARMERS AND ORDERED
RECONVEYED TO GOVERNMENT.
This particular decision on Civil Case No. 0033 – F, in effect,

decided as well on the subject assets of 0033 – B, the CIIF
Companies.
4. The December 28, 2004 Sandiganbayan decision
The Sandiganbayan merely reaffirmed its earlier decisions of

July 11, 2003 and May 7, 2004 in this decision denying the Motions
for Reconsideration filed by Cojuangco et al. but significantly
stressing that:
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.

Executive Director
Meanwhile, the Sandiganbayan decided to put the matter of the
other block of SMC into trial by merits. Cojuangco had gained voting
rights to the 20% SMC block from Sandiganbayan in February 1998
and sequestration was lifted in October 2004. Sandiganbayan has yet
to determine ownership of the said SMC shares.
In August 2005 the Office of the Solicitor General (OSG) filed

separate Motions for Writ of Execution of the decisions by the
Sandiganbayan on the UCPB and the CIIF-SMC block cases. A Writ of
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 Courts’ own
pronouncements in putting an end to the decades-old coco levy cases.
Court / Date Court Pronouncements Motion for Writ of Execution

(filed Aug. 9, 2005)
Supreme Court Civil Case No. 0033 has Considering the political and
Sept. 14, 2000 remained unresolved by the economic conditions in the
Sandiganbayan. The delay is country, the proper utilization
no longer tolerable for it of the aforesaid assets
locks in billions of pesos derived from the coconut
which could well rev-up our levy funds could be the only
sputtering economy. hope to genuinely address
the multifarious and
complicated problems in the
coconut industry and the
long-standing hardships in
the lives of millions of
coconut farmers.
Supreme Court Worse, it constitutes another Unless the government sets
Sept. 14, 2000 embarrassing evidence of the pace with bold and
snail-paced justice, so long forthright decisions and actions
lamented but mostly by our lips now, the industry might just
alone. The Sandiganbayan degenerate into what some of
must not be the burial its critics term it to be a sunset
ground of cases of far- industry. Truly there is a need
reaching importance to our to take decisive steps to
people. It is time to write remedy social and economic
finis to Civil Case No. 0033. inequities and quickly bring
justice, life and dignity to every
coconut farmer.
Supreme Court Furthermore, the It is about time that the true
Dec. 14, 2001 Sandiganbayan is ordered to beneficiaries of the coco levy

Executive Director
Court / Date Court Pronouncements Motion for Writ of Execution
(filed Aug. 9, 2005)
decide with finality the funds reap benefits therefrom.
aforesaid civil cases within a Any further delay in the
period of six (6) months from execution of the Partial
notice. It shall report to this Summary Judgment will
Court on the progress of the render it illusory (not real),
said cases every three (3) as the coconut industry had
months, on pain of contempt. been degenerating and the
coconut farmers gasping for
improved lives.
Sandiganbayan It is high time that the real Defendants (Cojuangco et al.)
Dec. 28, 2004 beneficiaries of the coconut do not claim to have acquired,
levy funds, the coconut and to be owners of what are
farmers who contributed to it, referred to as the CIIF Block.
and the entire coconut industry
be given a chance to reap the Evidence includes Respondent
benefits that are due them. Cojuangco’s own admission –
that the UCPB shares in
question herein had been
purchased with funds raised
thru government levies
imposed on coconut farmers.
Sensing that the trial by merits would prolong the resolution of the
20% SMC shares Cojuangco forwarded a Motion for Authority to Sell a
portion of the said shares to pay his Php 6 billion obligation to the
UCPB. Cojuangco obtained a huge amount of loan from the bank
during the time of President Estrada. Between 1999 and 2001, the
UCPB granted almost Php 4 billion loans to companies linked to
Cojuangco and Ramon Ang, Vice Chairman and President of SMC.
The loans were backed by questionable collaterals and payment was
hard to get by. With OSG’s opposition to the Motion the case is set for
resolution.
IV. POLICY RECOMMENDATIONS
With or without the coco levies the problems plaguing the coconut
industry needs to be immediately addressed. However, it would do well for
government to speed up the resolution of the coco levy cases as it would
spell a great big difference in its capacity to intervene.
Executive Director
The millions of impoverished coconut 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
potentials 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.
Coconuts offer a wide array of products and by-products starting from

the coconut meat. Most promising in the international market today is
virgin coconut oil, oleochemicals, and the coco methyl ester or biodiesel.
CAKES
DESICCATED
BISCUITS
COCONUT
ICINGS
COCONUT
FLOUR
Coconut VIRGIN COCO

COCO MILK
Meat OIL
NATA DE
COCO
COPRA
COCONUT
COPRA CAKE
OIL
MARGARINE
ANIMAL
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
Executive Director
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) scheme 16 . 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
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 opportunity
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.

And in order to make the efforts sustainable, the millions of small coconut
farmers and farm workers must be positioned at the core industry
development.

Executive Director
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
750,000 hectares planted to senile trees. Community-managed
coconut nurseries may be set up for this purpose. Involvement of
the coconut farmers and their communities will have far better
reach than any government bureaucracy.
A fertilization program needs to be undertaken to address the

490,000 hectares of nutrient deficient trees. This program can
utilize already available cocopeat-based organic fertilizer formulas.
Production of the organic fertilizer may also be community-based.
2. While most coconut farmers rely solely on copra production

technologies for semi-processing and processing value added
products and by-products need to be brought to the farms –
preferably in an integrated approach (similar to the CIIF Coco Farm
Development Program) to optimize various parts of the coconut
(husk, shell, water). Copra for oil processing, on the other hand,
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), geotextiles
and coco methyl ester (CME). Again the coconut communities can
very well fit into the production cycle. Quality standards need to be
implemented fully in order to avoid repetition of the “nata de coco
experience”.
The CIIF Oil Mills, being owned by government for the coconut
farmers, should act as integrator to the small producers. The CIIF

Executive Director
Oil Mills are in the best position, so far, to market and deliver the
coco products and by-products.
3. 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.
4. 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 initiated by the Department of Agriculture.
5. 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 implementation in coconut lands as
the existing prevalent relation is still that of share tenancy.
6. Pioneering research by Dr. Conrado Dayrit on coconut oil as cure

for HIV virus should be supported and pursued through the
Department of Science and Technology. The potentials the findings
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 products and
by-products for export and local use. Until today the country has to

Executive Director
export fresh coconut juice in its original package – the whole nut
itself.
8. The UCPB-CIIF Group of Companies (apart from the efforts of the

Oil Mills) can be mobilized to extend various services to the small
coconut farmers. UCPB Savings and Rural Bank can design
products to provide agricultural credit facilities. Design a Quedan-
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 copra.
On coco levy recovery
1. While actual recovery of the multi-billion coco levy funds and assets is
still at bay – participation of the small coconut farmers in deciding the
future of the coconut industry must be pushed and institutionalized at all
levels.
2. Serious efforts must be made in studying current and future roles of the
UCPB – CIIF Group of Companies for the farmers and the industry.
Those that do not have any bearing at all should be liquefied /
privatized instead so that proceeds may be utilized for coconut farmers
and industry programs. Those that have direct bearing should be
developed for the same cause.
PHASE 1 PHASE 2 PHASE 3

9 Preserve 9 Determine 9 Determine
assets and prevent assets to liquefy / & implement coco
dissipation privatize / retain and farmer and industry
develop programs
9 Hurdle
legal & extralegal
battle

Executive Director
3. Government should exhaust its efforts in obtaining the Writ of Execution
from the Sandiganbayan on the case of the CIIF-SMC shares. The Writ
shall enable government to liquefy the said shares and gain a
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.
4. Prior to liquefication of any recovered coco levy asset, it is important to

determine structures and mechanisms that shall ensure the delivery of
meaningful programs for the farmers and the industry. To be truly
meaningful the structure should ensure the participation of the small
coconut farmers from the national to the Barangay levels.
Recommended structure: The Coconut Trust Fund Committee

and the Local Coconut Development Councils
In setting up the structure and mechanisms it is important to note that

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 coco levy
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 from
the general funds of government pursuant to the Supreme Court and
Sandiganbayan rulings – A TRUST FUND. The amount of Php 50
billion can serve as a perpetual trust fund, the annual interest of which

Executive Director
may be utilized for programs for the development of the industry and
the farmers.
Office of
the
President
Government
Representatives
TRUST FUND Farmer

Representatives
COMMITTEE (men and women)
Other Stakeholders
PROGRAMS
MONITORING
INVESTMENTS (annual interest)
100%
UCPB OTHER BANKS
Programs to directly Programs to develop

benefit coco farmers the coconut industry
& communities
LOCAL NATIONAL
PROGRAMS PROGRAMS
60% 40%
PCA
DAR DOST DTI CIIF
/DA
Local Government
LOCAL COCONUT
Representatives DEVELOPMENT
COUNCILS
Farmer
Representatives (municipal)
(men and women)
Other Stakeholders
BRGY. BRGY. BRGY. BRGY. BRGY. BRGY. BRGY.
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.

Executive Director
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
Science and Technology, The Department of Trade and Industry
and the UCPB-CIIF Group of Companies.
The implementation of any of the programs (local and national) will have
direct bearing on 68 coconut producing provinces and more than 1,500
coconut municipalities. It is, therefore, essential as well that local
structures be established for planning, program identification,
implementation, and monitoring and evaluation of projects and programs.

Executive Director
The creation of the Local Coconut Development Councils from the
barangay to the municipal level can serve this purpose.
The Local Coconut Development Councils shall mirror the Trust Fund
Committee at the local level to be composed of local government
representatives, coco farmer community leaders and other stakeholders.
The Local Coconut Development Councils shall be tasked to identify the

needs of their particular communities; plan development initiatives for the
farmers and their local coconut industry assist in the implementation of the
programs and serve as monitoring arms of the Trust Fund Committee.
The structure institutionalizes mainly the participation of the small coconut

farmers and farm workers in the whole picture of coconut industry
development to assure its sustainability and correct the existing skewed
equity distribution in the industry. The Trust Fund set up may be legislated
by the Philippine Congress or through an executive fiat.
In the words of President Gloria Macapagal-Arroyo: It is high time to give

more power and autonomy to local governments and to take power from
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 UCPB-
CIIF”, Coconut Industry Reform Movement, Inc. (2005)
4
Faustino, Joey , “One Year of Farmer-Directors in the UCPB-CIIF Group” (May 2003)
5
Supreme Court, Cocofed et al. vs. PCGG et al. [GR No. 75713, October 2, 1989, 178 SCRA 236]
6
“P700-M coconut levy ready to benefit farmers – Arroyo”, Manila Bulletin, July 3, 2002
7
Gov’t scored for inadequate assistance to coco farmers, BusinessWorld, July 16, 2002

Executive Director
8
Presidential Decree No. 755 (issued 1975), ordering the acquisition of a bank for and in behalf of
the 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”
(December 2004)
10
The 12 Year Cocofund War, VOX POPULI, V4N3-98
11
Presidential Executive Order No. 828
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 /
Business Section, October 14, 2005
18
Domingo, Ronnel W., “RP-China countertrade deal boosts coco exports”. Philippine Daily
Inquirer / Business Section, June 16, 2005
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 Levy Racket”
Dayrit, Conrado S., “The Truth About Coconut Oil: The Drugstore in a Bottle”
Faustino, Joey, “CRONYcles on the Coco Levy Scam” (2003)
Fife, Dr. Bruce literatures:
a) The Healing Miracles of Coconut Oil
b) Eat Fat Look Thin
c) Coconut Lover’s Cookbook
d) Coconut Cures
e) Cooking with coconut flour
f) The Coconut Oil Miracle
Philippine Peasant Institute, “Sampung Tanong ni Tano sa Coco Levy”
Dr. Fife website: http://www.simplycoconut.com/

PCA: http://pca.da.gov.ph/
UCAP: www.ucap.org.ph

Executive Director

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

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

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FACING THE CHALLENGES OF THE

PHILIPPINE COCONUT INDUSTRY: THE

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

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

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

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

In 1996 the Philippine Coconut Authority launched the Small Coconut

Joey T. Faustino EPRA Paper/ 2

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

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

Practically thriving on its own with very minimal intervention from

Joey T. Faustino EPRA Paper/ 3

The Executive Branch had already supported such developments with

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

Joey T. Faustino EPRA Paper/ 4

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

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

Joey T. Faustino EPRA Paper/ 5

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

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

Joey T. Faustino EPRA Paper/ 6

After the declaration of Philippine independence government

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

A) THE EXPORT-ORIENTED INDUSTRY IS A MAJOR CONTRIBUTOR

The coconut industry substantially contributes to the country’s yearly

Joey T. Faustino EPRA Paper/ 7

Exported traditional coconut products, coco chemicals and other non-

B) THE EXPORT EARNINGS ARE LARGELY LIMITED TO

Most of the earnings merely come from export of traditional coconut

Total Revenue 2004

Source: Philippine Coconut Authority

Joey T. Faustino EPRA Paper/ 8

Table 1. Philippine Exports of Coconut Oil (CNO)

Joey T. Faustino EPRA Paper/ 9

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

Geotextiles are synthetic permeable textile materials used with soil,

Joey T. Faustino EPRA Paper/ 10

C) THE COUNTRY’S COCONUT PRODUCTION IS DECLINING.

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

It is the unstable trend in production coupled with fluctuating world

The Philippine Coconut Authority reports that coconut production in

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

Table 4. RP Processing Capacity

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

D) COCO LANDS IN THE COUNTRY ARE SHRINKING DUE TO

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

Massive coconut tree cutting and land conversion have drastically

E) SMALL COCONUT FARMERS AND FARM WORKERS HAVE BEEN

Joey T. Faustino EPRA Paper/ 13

However, they have remained gravely marginalized. Studies in 1999

Joey T. Faustino EPRA Paper/ 14

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

F) PERENNIAL PROBLEMS PLAGUE THE INDUSTRY:

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

Usually government and the business leaders view these problems in

Low Farm Productivity. The average farm production per hectare

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

Joey T. Faustino EPRA Paper/ 15

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

Lack of Infrastructure Support. There is need for some building

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

Joey T. Faustino EPRA Paper/ 16

P181 M loan receivables

The coconut farmers themselves should be allowed to determine

74 operational DCM nationwide with membership of 29,850 farmers.

How many of the operational DCM sites are profiting / losing?