CHAPTER I

INTRODUCTION

Background of the Study

The Philippine coconut industry is a large pillar of the national, economic and cultural
heritage of the country. It is important to the national patrimony, as it is the source of valuable
commodity and renewable asset, vital in building a strong nation.

The area currently planted to coconut is about 3.565 million hectares or 26 percent of
country’s total agricultural lands. Also, 68 out of 81 provinces are coconut-growing
areas.1However, the Philippines continues to lag behind India and Indonesia in terms of
production, based from the recent study of United Coconut Association of the Philippines
(UCAP).2

About 26 million Filipinos depend on coconut trees for their livelihood. For the marginal
coconut farmers, they depend mostly, if not entirely, on coconut for their need for food, clothing,
shelter and education for their children. But while the prospects in the global market for coconut
products are encouraging, the current situation in the local coconut industry is, however,
challenging, if not alarming. The timely intervention by the government on the issues now
confronting the local coconut industry would be very crucial for its survival.

The coconut levy funds which are now worth about P100 billion upon which coconut
farmers had been pinning their hopes for salvation still remain frozen in the national treasury.
The bill pending in Congress that will finally provide for the utilization of the funds entrusts the
management of the funds with the Philippine Coconut Authority. However, PCA’s charter will
have to be amended and that could very well take a year, or forever, if the 45- year saga of
the Cocolevy fund is any indication.
 The Supreme Court made emphasis on the importance of the said funds in its ruling
from Pambansang Koalisyon ng mga Samahang Magsasaka at Manggagawa sa Niyugan (PKSM
MN) v. Executive Secretary, that said funds were raised pursuant to law to support a proper
governmental purpose. They were raised with the use of the police and taxing powers of the
State for the benefit of the coconut industry and its farmers in general. The COA reviewed the
use of the funds. The Bureau of Internal Revenue (BIR) treated them as public funds and the
very laws governing coconut levies recognize their public character.

In 2012, the Supreme Court also ruled in the case Eduardo Cojuanco,Jr. v. Republic of
the Philippines, that a block of shares from San Miguel, UCPB and Oil Mills Group of
Companies be given to coconut farmers; however, this has yet to materialize. As the court ruling
stressed that the agreement between the Philippine Coconut Authority-Cojuanco Agreement as
referred in Section 1 of P.D. 755 was not reproduced or attached to the same law. And well-
settled is the rule that laws must be published in order to be valid, citing the case of Canada vs.
Tuvera.3 In this case, the Supreme Court affirms the ruling of the Sandiganbayan in holding that
the said agreement shall be treated as an ordinary transaction between agreeing minds to be
governed by contract law under the Civil Code.

Recently the Senate adopted and ratified bicameral conference committee reports on the
bill seeking to set up a P100-billion trust fund for coconut farmers and the bill to strengthen the
Philippine Coconut Authority, which will handle the funds.

Moreover, many recommendations have been offered as a way of increasing coconut

farm productivity and farmers’ incomes with the aim of freeing coconut farmers from poverty.
Among these are crop diversification of coconut lands to other crops, the integration of livestock,
product diversification, and value adding.All these recommendations are useful but none provide
a solution to the problem of the very low yield of the coconut trees, which is the major cause of
the farmers’ low incomes, which lead to poverty.
Statement of the Problem
The main objective of this study is to know various amendments of the bill and how these
amendments will affect the distribution of the said funds to the coconut farmers. Said creation of
the law is set to give hope to the farmers amid the controversies the said fund have been
through.

1. What is the current status of the Philippine laws regarding the coco levy fund
2. What are the effects in giving the proceeds
A.) Coconut farmers
B.) Government
3. What are the justifications for amendment for creating Senate Bill No. 1913

Significance of the Study

This section will provide brief description on the significance of the study to different
sectors such as the State, the coconut farmers, the public and the future researchers.

To the State: This study will provide the government useful information and considerations in
enacting laws for the proper distribution of the said assets to the coconut farmers. In effect
the law making body of the government will have additional grasp of the current impact of the
delayed distribution of the fund to the marginalized coconut farmers.

To the Coconut Farmers: This study will help them to be up to date of the recent developments
of the bill being enacted in the Congress. Furthermore, the said topic is geared towards helping
our coconut farmers in informing them of what is due to them, which some of them were no
longer taught of what they were bound to receive as beneficiaries. Unfortunately
,even though Supreme Court have laid down several decisions emphasizing that said funds were
special funds allocated specifically to them, still our farmers remain empty handed.

To the Public: This study will serve as an eye opener to the public as to the current situations of
the coconut industry in the Philippines as well the impact of said Cocolevy fund issue to the
society’s interest towards transparency in government’s projects in future generations to come. It
will help them understand the poor condition of the coconut farmers and its impact to the
economy of the Philippines, being one of the major producers of the coconut in the world.

To future researchers: This study will serve as a future reference to researchers who share the
same area of interest. This study can also open in the development of this study.

Scope and Delimitation

The scope of the study is limited to discuss the various implications of the said Senate
Bill 1913 when it repealed PD 1468. It is also to discuss the importance of the coconut industry
to the Philippine economy and to propose long term achievable solution which will help the
coconut farmers to be competitive in the market.

Definition of Terms
1. P.D. No. 276 - established the Coconut Consumers Stabilization Fund (“CCSF”) and
declared the proceeds of the CCSF levy as trust fund, to be utilized to subsidize the sale of
coconut-based products, thus stabilizing the price of edible oil.

2. P.D. No. 582 - created the Coconut Industry Development Fund (“CIDF”) to finance the
operation of a hybrid coconut seed farm.

3. P.D. No. 755, under its Section 2 - authorized PCA to utilize the CCSF and the CIDF
collections to acquire a commercial bank and deposit the CCSF levy collections in said bank
interest free, the deposit withdrawable only when the bank has attained a certain level of
sufficiency in its equity capital. The same section also decreed that all levies PCA is
authorized to collect shall not be considered as special and/or fiduciary funds or form part of
the general funds of the government within the contemplation of P.D. No. 711.

4. P.D. No. 961 - codified the various laws relating to the development of coconut/palm oil
industries.
5. United Coconut Planters Bank - bank created thru the enactment of Presidential Decree
775 (or P.D. 775) where President Ferdinand Marcos in July 29, 1975, instructed
the Philippine Coconut Authority (PCA) to "formulate and recommend for adoption credit
policies affecting production, marketing and processing of coconut and other palm oils" and
"to provide readily available credit facilities to the coconut farmers at preferential rates."

6. Philippine Coconut Producers Federation, Inc. (COCOFED) - confederation of

associations/organizations involved in the various activities of the coconut industry.

7. Philippine Coconut Authority - is the sole government agency that is tasked to develop
the industry to its full potential in line with the new vision of a united, globally competitive
and efficient coconut industry.

8. Coconut Farmers - group of people engaged in planting and sowing of coconut by

products.

9. Trustee - an individual or corporation named by an individual, who sets aside property to

be used for the benefit of another person, to manage the property as provided by the terms of
the document that created the arrangement.

10. Beneficiary -is a person or entity who receives a profit, advantage, or benefit.
 CHAPTER II
REVIEW AND RELATED LITERATURE

The colorful history of the Philippine coconut industry is twined to the important chapters
of history not only of the nation but also the world itself.

The five vital phases of emergence and growth of this industry are categorized as follows:
(1) the periods of emergence (2) the American Colonial period; (3) the post-independence
period; (4) the levy period and the (5) present.

Emergence of an Industry - Spanish Colonial Period (1521-1849)

The Spanish colonial government issued edicts decreeing the planting of coconut in the
country, even stipulating the number of trees planted according to social classes and imposing on
each adult the planting in an area of at least 200 sq. ft. This period also saw the introduction of
crude and oil processing, the exportation of the husked nuts and copra and increased use of
coconut in the manufacturing of margarine and explosives.

American Colonial Period (1900-1946)

The period of world depression in the early 20th century cut back the demand of coconut
products despite its preferred position in the U.S. market, which has acquired a taste of
margarine. The two world wars ushered post-war depressions which was most acute after the
First World War. This saw the closure of many mills as demands for coconut-based products
declined. This period also saw the imposition of a U.S. cent excise tax on the called “coconut
cow,” which was perceived to be a threat on the U.S. dairy industry.

Post-Independence Period (1946-1973)

This period saw the recovery of the industry which also saw high prices and more
processing witnessed by the proliferation of the coconut oil processing and expansion of coconut
desiccating industry. The period of import and exchange controls also witnessed the promotion
of barter trade and export undervaluation in the face of the fixed unrealistic exchange rate.

Coco-Levy Period (1973-1986)

The early seventies saw a commodity boom that pushed up the price of the coconut
products to unprecedented heights. This prompted the imposition of levies ostensible to float
Coconut Investment Company (CIC), the fist levy amounting to P150 million, a Coconut
Consumers Stabilization Fund (CCSF), to Coconut Industry Development Fund (CIDF) to
promote a vertical integration of the coconut industry.

Post-Levy Period (1986-2000)

This saw the end of the levy collections and the restoration of the market forces through
the dismantling of the Unicorn monopoly. A series of litigation and judicial decisions led the
government to re-conversion of the “privatized” fund to the government by the Supreme Court.
This also saw the proliferation of small coconut farmers organization and attempts at replanting
and farm rehabilitation with the support of the World Bank.

The Philippine Coconut Industry

The coconut industry is the 4th largest contributor to GVA of the Philippine agriculture,
there are about 3.5 million coconut farmers and 7,300 traders which help hand in hand in
creating and keeping alive the said field. About 26% of total agricultural land were used to
coconut farming far more small to other lands used in other agricultural crops.

Throughout the Philippines, the coconut is consumed and utilized in a variety of ways.
Coconut leaves are often used to wrap rice for cooking and used in its subsequent storage in
packets known as “puso.” Coconut milk, coconut jam and so-called coconut sport fruits,
sweetened meat of the copra that is sliced and severed in strings, are all popular forms of
consuming coconuts.
Although the Philippines produced an impressive 15.2 billion-nut equivalent and 2.5 million
metric tonnes of coconuts (in copra terms) during 2011, according to the PCA, the organization
noted that the output is only 30 per cent of potential capacity which gives more reason to create
solutions to this recurring problems of the coconut farmers.

There were several laws and organization/s created such as:

1. COCOFED

Historically the Philippines is an agrarian society in which traditional social and

economic status has long been dominated and affected by its political system. A group of
coconut hacienderos in Southern Mindanao were able to organized COCOFED Group which
were able to solicit barter privileges from the government, which lucrative business in the period
of export and import were made. The COCOFED and its allies worked hard to push the first
coconut levy in 1971.

2. Republic Act No. 6260

The first of the levy is the so-called Cocofund Levy mandated by Republic Act No. 6260,
known as the Cocofund Law. This law provided for the collection of a levy of P 0.55 per 100
kilos of copra produced to be imposed for 10 years starting 1972. The collections made were to
be used to establish Coconut Investment Fund. The CIC was envisioned as a company owned,
capitalized and administered by those deriving their livelihood from the coconut industry.
Under Cocofund Law, the CIC shares of stock were distributed to coconut farmers / landowners
in exchange for Cocofund Receipts.
3. Presidential Decree No. 276

P.D. 276 established the Coconut Consumers Stabilization Fund (CCSF) which imposed
on every first sale a levy of P 15 per 100 kilos of copra or its equivalent on other coconut
producers. This was promulgated on August 20, 1973 because of dislocation in price and supply
caused by abnormal situation in the world market.

4. Presidential Decree No. 414

On April 19, 1974 PD 414 was created which later created Coconut Consumers
Stabilization Fund, the proceeds of which were deposited to Philippine National Bank. Said
funds were utilized to provide a subsidy to coconut farmers.

5. Presidential Decree No. 582

PD 582 was created to establish another fund, the Coconut Industry Development Fund.
The fund was intended to finance the establishment and operation of hybrid seed farms. The law
authorizes the National Investment and Development Center to negotiate to any private person to
ensure the country shall have the earliest possible time a continuous supply of seeds.

6. Presidential Decree No. 755

This law improved the implementation of the agreement for the aquisition of commercial
bank for the benefit of the coconut farmers.

7. Presidential Decree No. 1468

This was established to reimpose the two levies (1) CCSF Levy and (2) CIDF Levy.

8. S.N. 1913
An act authored by Senator Cynthia Villar to further strengthen the Philippine Coconut
Authority which repealed P.D. No. 1468. Its purpose is expressed in its explanatory note which
provides that it is to make PCA responsive to the needs of the coconut farmers by making
coconut industry more competitive and most importantly to safeguard the P100
Billion cocolevy fund in the national treasury.

Siquijor lone district Representative Rav Rocamora filed a companion bill to the
proposed Coconut Farmers and Industry Trust Fund Bill, which has been approved by the
bicameral conference committee.

The proposed measure, House Bill No. 8062 (An Act Reconstituting the Governing
Board of the Philippine Coconut Authority, providing for Greater Coconut Farmers’
Representation, Amending for the Purpose Presidential Decree No. 1468) will strengthen the
representation of coconut farmers in the Philippine Coconut Authority’s (PCA) governing board
so that they can effectively participate in the crafting and implementation of the Coconut
Farmers and Industry Development Plan.

He stressed the urgency by which Congress must pass the proposed measure otherwise
the Coconut Farmers and Industry will become a half-baked law.

“This proposed bill is necessary in order to effectively implement the Coconut Farmers
and Industry Trust Fund Bill should it become law. Without our companion bill reconstituting
the PCA, the very spirit of the Coconut Farmers and Industry Trust Fund Bill will remain
unfulfilled.”5

Levy-Funded Projects

The levies were supposed to address the following problems:

1. The under-productivity and inefficiencies in the production and processing;
2. the marketing system and,
3. the gaps in the financial system which forces the farmers into high cost money lending of
credit institutions.
 Given these problems, forms of intervention were made such as the Bugsuk Island
development to take care of the hybridization and replanting program. The creation of United
Coconut Planters Bank (UCPB) to answer for farmers’ credit needs and the CIF to provide long-
term funds to accelerate capitalization of the industry.

Recent Supreme Court Rulings

1. Republic vs. COCOFED, G.R. No. 147062-64, December 14, 2001

In this the pivotal issue discussed by the Supreme Court is whether the PCGG can vote
the sequestered UCPB shares. The Supreme Court ruled that the Sandiganbayan committed
grave abuse of discretion in grossly contradicting and effectively reversing existing
jurisprudence, and in depriving the government of its right to vote the sequestered UCPB shares
which are prima facie public in character. As the coconut levy funds are not only affected with
public interest, but are in fact prima facie public funds, the Court believes that the government
should be allowed to vote the questioned shares, because they belong to it as the prima facie
beneficial and true owner.

2. Eduardo Cojuanco Jr. vs. Republic of the Philippines, G.R. No. 180705, November 27,
2012

The Supreme Court made emphasis that publication is an indispensable condition for the
effectivity of the law. That the PCA-Cojuanco Agreement was not reproduced or attached as an
annex to the law. Furthermore, PD 755 did not in any way reproduce the exact terms of the
contract decree hence, the Supreme Court cannot extend to the status of the said agreement the
status of a law. The Court merely treated it as an ordinary transaction between agreeing minds to
be governed by the Civil Code.
 CHAPTER III.
RESEARCH METHODOLOGY
This Chapter provides the information on how the researcher conducted the study. This will
explain the method used in obtaining relevant information to the study. This section will also
show the questions used by the researcher in interviewing its respondents in order to obtain
additional knowledge, opinion and inputs related to the study.
Research Design
The researcher makes use of the qualitative method in conducting the study. The researcher
obtained handful information relevant to the study by conducting an interview through the use of
questionnaires. The researcher made use of the qualitative method because it is easy to
summarize, compare and generalize.
Data Gathering

Respondents of the Study

Sources:

https://news.mb.com.ph/2018/12/01/senate-ratifies-p105-b-coco-levy-fund/
https://www.manilatimes.net/state-ph-coconut-industry-must-done/346624/
https://businessmirror.com.ph/2017/05/25/government-help-badly-needed-in-coconut-industry/
http://sc.judiciary.gov.ph/jurisprudence/2012/november2012/180705.pdf
http://agriculture.com.ph/2018/07/17/transform-coconut-farmers-from-poverty-to-prosperity-by-
revising-government-policies-part-1/
https://legal-dictionary.thefreedictionary.com/trustee
https://pia.gov.ph/news/articles/1012373