Coconut levy: An unfulfilled promise

The coconut levy was imposed on our coconut farmers with a promise that this would benefit them in the long run.

The “long run” is getting longer and longer, and the promise remains unfulfilled. We focus here on transforming this promise into reality.  It centers on the three pillars of an approach to the coconut levy called UMA: Utilization, Management, and Administration.

UMA is also the Visayan word for farm. This is most appropriate. The coconut levy should be for the coconut farmers, and not for other parties that are currently maneuvering to take advantage of the fund at the farmers’ expense. This is basically the recommendation of the Coconut Industry Reform Movement (COIR). Its executive director is Joey Faustino, and among the group’s leaders are former Senator Wigberto Tanada and coconut industry champion Oscar Santos.

The coconut farmers claim 47 percent of San Miguel Corporation shares, which were purchased using coconut levy funds. The Supreme Court has decided that 27 percent should go to the farmers, while the remaining 20 percent should go to Eduardo Cojuangco, Jr. Putting aside the farmers’ appeal that the Supreme Court reconsider its decision on the 20 percent given to Cojuangco, we will discuss here only the 27 percent share that belongs to the farmers.

Right now, this is split into three components. The first is the P56 billion that is now deposited in the National Treasury. The second is the P14 billion that constitutes dividends earned over the last three years, which are now deposited in the United Coconut Planters Bank. The third is the P17 billion that constitutes 4 percent from the 27 percent of the farmers’ portion.

These three components should be consolidated into one common fund in the form of a Coconut Levy Trust account. Only interest from this fund will be used, with the principal untouched so that the fund benefits can be provided on a continuous basis.

The management of this fund should ensure that the interest earned will be used solely for the benefit of the coconut farmers. A priority project will be the setting up of community-based coconut processing and value adding plants. These should be largely owned and controlled by the farmers themselves. These will serve as “anchors” for the small coconut farmers who will benefit from economies of scale, as well as the value added from coconut that is now sorely missing.

The interest money can likewise be leveraged for loans from other sources, such as banks and financial institutions. When we look at the coconut sector, we should consider what the coconut farmers can get not only from coconut alone but also from the coconut land they till. Aside from fertilization and replanting, inter cropping between the coconut trees can yield significantly more income than the annual average annual income of P15,000 per hectare from coconut alone.

Rolando Dy has shown that a hectare’s intercropping with cacao can net an annual P97,000; coffee, P100,000; and cacao and bananas P120,000. Dy’s caveat is that this requires “good seedlings, planting and fertilizing according to specifications, and following good harvest and post-harvest practices”. These requirements are precisely what the coconut levy can provide.

Since this levy has not been used, it is no wonder that only a third of our 3 million coconut farmers and farmer workers tilling 3.5 million hectares are doing intercropping!

Even if the coconut levy is intended to be used and managed for the benefit of the coconut farmers, having the wrong administrative body carry this out may put all these good intentions to waste.

Since the levy is technically a government fund, many argue that the administrative body should be composed of government officials. Given the sad history of the coconut levy, this proposal should be rejected.

Instead, the COIR’s position should be supported: there should be a multisectoral coconut levy council that will supervise the administration of this fund. In addition, the farmer representatives should constitute the council’s majority. This will ensure that the levy will be used for their benefit, and not diverted to other purposes, which is a significant risk today.

So why is UMA not being implemented today? It is because there is no “entry of judgement” from the Supreme Court on the case of the Coconut Industry Investment Fund – San Miguel Corporation shares (the 27 percent for the farmers earlier alluded to)  after all this time.

The Presidential Commission on Good Government (PCGG), with the full support of the Office of the President, should now exert all efforts to secure this “entry of judgement”. Only with this judgement, together with the UMA approach implemented, will the coconut levy become a promised fulfilled.

(The author is chair of Agriwatch, former secretary for Presidential Flagship Programs and Projects, and former Undersecretary for Agriculture, Trade and Industry. For inquiries and suggestions, e-mail [email protected] or telefax 8522112.)