Free P9-B coco levy fund, Aquino urged

(First of three parts)

COCO FAN President Aquino proudly shows packs of “buko” juice, one of the products of the Philippine coconut industry, in this photo taken last year. ARNOLD ALMACEN

President Benigno Aquino III had a eureka moment on his last visit to the United States in September last year.

He had a taste of coco water, courtesy of Brazilian businessman Rodrigo Alvarez, whose product had become an instant best seller among American and European fitness buffs.

Mr. Aquino was told that what Filipinos called “buko” juice had more mineral and potassium than Gatorade, the popular sport drink endorsed by his airness, Michael Jordan.

On his return to Manila, an upbeat President announced that the newly discovered thirst quencher in America could be a savior for impoverished coconut farmers and their families who comprise a quarter of the nation’s almost 100 million population.

“Doesn’t it sometimes just go to waste? Who would have thought we could earn from it to uplift the lives of many Filipinos in the provinces,” Mr. Aquino said of the coconut water spilled in copra-making.

The President announced that while in New York, he was told that Pepsi Co. and Vita Coco had expressed interest in investing in buko juice—with the latter planning to put in some $15 million in the country in the next four years.

Mr. Aquino’s pronouncements have prompted some industry players to, well, scratch their coconuts.

In the first place, they say, there’s the billions of pesos in sequestered assets—principally shares of stock in San Miguel Corp. (SMC) and six major coconut oil mills—acquired with the tax on copra collected from farmers for nine years during Ferdinand Marcos’ martial law rule.

Little of the funds went to the farmers, although decrees concerning the levy specified that the tax should be used for their benefit.

In the last two years alone, nearly P9 billion in dividends from a 24-percent block of SMC shares that is awaiting final resolution in the Supreme Court on ownership issues has been deposited in trust at United Coconut Planters Bank (UCPB). Activists have urged the immediate release of this amount to the farmers.

The Philippine Coconut Planters Federation, or Cocofed, has filed a motion for reconsideration of the court’s ruling ordering the funds to be used by the government to uplift the lives of the farmers—described as among the poorest of the poor Filipinos.

Cocofed, which has been accused of stealing levy funds for private projects, is claiming ownership of the SMC shares on behalf of the farmers.

Dwindling harvests

Activist groups on a crusade to recover the funds for the farmers now want to use, initially at least, the P9 billion in SMC dividends from the conversion of 700 million shares of SMC stock from common to preferred two years ago.

“Legally, it’s only a question of making a final decision,” said Omi Royandoyan, executive director of the NGO Centro Saka, or the Philippine Center for Rural Development Studies.

In May 1998,  President Fidel Ramos issued an executive order directing the Presidential Commission on Good Government to release P2 billion in sequestered levy funds for the urgent rehabilitation of the industry.

The move was opposed by Eduardo “Danding” Cojuangco, SMC chairman and uncle of President Aquino. He cited the unresolved cases in the courts.

The sequestered assets when liquidated could generate over P100 billion in capital. Interests alone could provide each of the 20,000 barangays engaged in coconut production with roughly P300,000 to P400,000 annually, said Oscar F. Santos, 83, a former Quezon representative who has been on the forefront of the crusade to recover the funds for the farmers.

The other reason other players aren’t exactly going loco over buko, as it were, is that coconut harvests have gone down dramatically in recent years as yields from aging trees have dwindled, authorities say.

The output is not even enough to supply oil mills, which get up to 91 percent of the fruits turned into copra, for such things as cooking oil, shampoo, explosives, perfumes, pharmaceutical products to combat cancer and Alzheimer’s. The other 9 percent is shared by producers of ingredients for pastries, virgin oil, cream and, yes, buko juice and its tender meat for salads.

Double whammy

There are widespread reports of copra being smuggled into the country from Indonesia and Vietnam to cover the shortfall from the country’s 320 million coconut trees, authorities say.

“To keep the oil mills rolling, in the next five years we need to have massive replanting, especially if you want to go into downstream products, for example, oleo chemicals, coco water,” Royandoyan said.

The Philippine Coconut Authority (PCA) says the harvest per tree has fallen from around 50 to 60 nuts annually to just over 30 because of senility.

A second whammy comes from climate change. Prolonged dry spells have whittled down the size of the nuts from as big as basketballs to as small as baseballs.

This year, the PCA says it will spend P503 million to plant 13 million coconut trees and distribute P360 million worth of fertilizers—mainly salt—to nourish 20 million trees.

All of these issues weighed heavily during last December’s joint Senate hearing of the committees on agriculture and food, trade and commerce and finance, essentially on what the government should do with the billions of pesos in sequestered coconut-levy related assets amid concerns that the money would again be squandered.

Fear of raiders

PCA Administrator Euclides Forbes’ proposal that the fund be used for replanting and distribution of fertilizers was immediately knocked down by Senate President Juan Ponce Enrile because of these worries.

“If you are going to use this in pitsi-pitsi (a smorgasbord of cassava and rice cakes) operation like fertilizer, roads and so forth, you dissipate the money,” Enrile said. “You will not benefit the farmers, you will benefit the pockets of people who will raid it.”

Enrile knows whereof he speaks. Aside from once running a coconut plantation in Mindanao, he headed the PCA when Marcos expanded the powers of the then Philippine Coconut Administration, or Philcoa, in 1973 to supervise the industry under martial rule.

Enrile, then Marcos’ defense minister, became part of the triumvirate that run the industry. The others were Cojuangco, then UCPB president, and the late Maria Clara Lobregat, then Cocofed chief.

The following year, Cojuangco launched a replanting program for 2 million of the 3.2 million hectares of coconut farmlands with a Malaysian-West African (Mawa) variety propagated in his seedling farm on Bugsuk Island on the southern tip of Palawan island.

The P900-million program was a disaster and the program described as a scam by militant farmers’ groups. The variety was not suited for the Philippines, according to farmers.

Reform-minded activists say that even after the Edsa Revolution of 1986 that ousted the dictator, there has been no serious effort to rejuvenate the industry.

The Arroyo administration embarked on a fertilization program, importing P700 million worth of salt from Australian. Most of the fertilizer bags sat in regional warehouses. Farmers in the mountains did not have the means to transport the fertilizer to their farms.

Another P800 million was allocated to the PCA for a coconut farm development program. The PCA was supposed to set up 100 coconut nurseries across the land. It turned out to be nothing more than a “ghost project,” according to industry activists.

Redemption

The current PCA leadership does not inspire too much confidence that, like Steve Jobs whose reality distortion field gave Apple all those wonderful I-products, it could undertake an honest-to-goodness effort to modernize the industry.

Insiders say the PCA does not have the creativity required to initiate a socioeconomic program to transform the biggest export earner among agricultural crops.

Government support to the sector has been underwhelming. Infrastructure is almost nonexistent in the mountains where most coconut farms are located. There’s been no effort to dismantle control by traders over the industry, or introduce intercropping to allow farmers to earn supplementary incomes.

“The level of poverty is high, tenancy there is high,” Royandoyan said. “The capacity of our farmers is only up to their farms. Traders go up there and get their copra at prices way below those offered by oil millers in the cities. The business is a monopoly of the traders.”

Royandoyan said Centra Saka had conducted a study of copra trading in Samar and Leyte. He said a Chinese businessman who sent a truck up and down the hills just to haul copra and bring it to the cities became a millionaire in just three years. Competition for copra among the scores of small oil millers in Lucena is stiff.

“The political economy has not matured. The coconuts are mortgaged to the traders. That’s why you have a situation when the new school year comes, farmers in May or June already are selling their coconuts, even if they are not yet ripe, at a low price so they could get the tuition for their children,” he said.

“For some time, we had proposed a redemption. If we use the levy funds, we will redeem the hardship of the farmers, set up direct copra marketing … If harvesting is done in 45 days, we can secure a contract to buy the copra depending on market price and pay the farmer in advance of that day.”

“There’s sufficient levy money to address the backwardness, the poverty in the industry so the farmers will not be totally dependent on the traders. All we have to do is modernize,” he says.

“You have the money. You control the big oil mills, meaning you have influence in the market. The PCA should help in the social reengineering, education, organizing …  the big players don’t want us to modernize, because many of them will be hit hard.”

Untapped El Dorado

During the Senate hearing, participants lamented that coconut water is just thrown away. Senator Edgardo Angara said Filipino farmers could learn from producers in Brazil, who are able to preserve coconut water for up to eight months.

Only 15 percent of coconut water in the Philippines is retained in the handling of the nuts, mainly by such dessicators as Franklin Baker, which grind the meat for export to pastry makers in Europe, and Peter Paul Candy Manufacturing. The rest of the 85 percent is simply thrown away after a coconut is hacked by a machete-wielding copra worker.

The highly nutritious coco cream is also making inroads in the international market, competing with soy and almond milk, according to John Roulac, head of Nutiva, one of the world’s leading brands of hemp, coconut and chia superfoods.

Jun Castillo, a private entrepreneur who runs a string of Coconut House restaurants and ice cream parlors, has concocted a powerful frizzy nectar from the flowering stem of a coconut tree, a source of the local wine called “tuba.” He sells the brew to golfers to enable them to hit their balls farther than a Tiger Woods drive on the fairways.

But the biggest money is foreseen to come from the lowly coconut husk, an untapped El Dorado in the mountains. Some 2 million of these coconut coats go to waste each year. The world demand for coir, which is extracted from coconut husk, is some 15 billion tons annually—used for mattresses by car manufacturers in Europe and as mats to arrest creeping “desertification” in China because of the fibers’ ability to store water.

The country produces 300,000 metric tons to 500,000 metric tons of husk but exports only 5,000 MT of coir, according to the PCA.

Burial ground of cases?

Very little of the income from coir go to the farmers; huge profits go to “consolidators.” In coconut-producing villages, farmers now keep the husks and sell them for 25 centavos a piece to traders, who bring them to the towns for a decorticating machine to process the fibers. There, the husks are sold for 14 pesos a kilo, which is the weight of seven pieces.

The possibilities from what is called the “tree of life” are endless, except that for such reform advocates as Senator Joker Arroyo, it has been, through the years, nothing more than a “tree of injustice.”

Santos, a former congressman whose hair has disappeared as he waited and waited the past three decades for justice to be served to the farmers, says it is time to use the coconut levy funds to free the farmers from bondage to poverty.

The Supreme Court itself has said, according to Santos, that the courts could not be the “burial grounds of cases of far-reaching importance.”