Benigno Aquino III. INQUIRER FILE PHOTO
The Aquino administration has ruled out urgent use of frozen funds arising from sequestered shares of San Miguel Corp. (SMC) worth at least P85 billion to rehabilitate the troubled coconut industry pending a final decision of the Supreme Court on the issue.
Budget Secretary Florencio Abad and Administrator Euclides G. Forbes of the Philippine Coconut Authority (PCA) said Malacañang could not act on demands by militant farmer groups that President Benigno Aquino III issue an executive order directing the Presidential Commission on Good Government (PCGG) to free up interests and dividends from the SMC shares.
The Supreme Court in January ruled that a 24-percent bloc of SMC shares acquired with funds from a coconut levy imposed during the martial law years and sequestered upon the ouster in 1986 of the dictator Ferdinand Marcos belonged to the government and should now be used to ease the lives of 3.5 million farmers and their families comprising a quarter of the country’s population regarded as the “poorest of the poor.”
The Philippine Coconut Producers Federation, or Cocofed, has filed a motion for reconsideration, claiming the portfolio in behalf of some 1 million unnamed coconut farmers.
The 700 million SMC shares, along with interest and dividends, were officially valued at P84.3 billion in January. Quarterly dividends alone from the stocks over the last two years had reached P8.8 billion, which farmer groups are demanding that Mr. Aquino unfreeze to ease conditions in the coconut industry wracked by falling harvests as a result of senile trees, fertilization problems and the adverse impact of climate change.
“Despite the huge funding requirements to rehabilitate the coconut industry, the shares and dividends cannot be deployed to help the industry because they are tied up in suits,” Abad said in a series of text messages to the Philippine Daily Inquirer over the Holy Week on the 24-percent portfolio designated as SMC-CIIF, after the Coconut Industry Investment Fund which purchased the bloc under an elaborate scheme that involved 14 holding companies.
“The government cannot proceed with the disposition of the shares as Cocofed filed a motion for reconsideration and no decision has so far been made,” Abad said. “We hope that the Supreme Court doesn’t take much longer in declaring as final its decision on the case.”
Joke of century
Reacting to a three-part Inquirer special report on the coconut industry, Forbes said: “President Aquino has no control of the P9-billion fund mentioned because it is held in escrow upon orders of the Supreme Court … Even as this decision is unanimous, its finality is delayed by the motion for reconsideration of the losing parties.”
“The President cannot by his own power free such fund in escrow. The only thing the government may do during the pendency of the resolution on the motion for reconsideration is to file a motion to release the dividend pendente lite. But again the release of such fund rests on the discretion of the Supreme Court,” Forbes said in a letter to the Inquirer.
The funds are deposited in state-owned United Coconut Planters Bank (UCPB).
UCPB, then under the control of Eduardo “Danding” Cojuangco, Mr. Aquino’s uncle and a major contributor to his presidential campaign in May 2010, provided the funds used to acquire the 24-percent SMC package in 1983.
In recent years, UCPB has been accused of extending questionable loans worth billions of pesos to SMC, of which Cojuangco is chair. The government extended a P30-billion rehabilitation loan to the tottering bank in 2008.
In April 2001, the court gave another bloc of contested SMC shares, comprising 20 percent of the highly diversified conglomerate, to Cojuangco. His critics said Cojuangco, in violation of his fiduciary trust, had borrowed UCPB funds to acquire his SMC shares.
The Supreme Court’s decision, described by a dissenting justice as “the joke of the century,” became final last month after the tribunal dismissed several appeals.
During a Senate hearing in December last year, fears were expressed that the levy funds would again be dissipated as the court decision was being awaited.
Questions over deal
Abad told the Inquirer that a provision in the Supreme Court decision—one that the budget secretary said the government could sell the shares only to SMC and only at P75 per share when the portfolio was converted from common to preferred shares in 2009—should be looked into.
Quoting former Senator Wigberto Tañada, the current CIIF chair, Abad said the court-mandated price would only fetch the government some P57 billion.
Abad said that if the shares were instead sold at the prevailing market value of P114 per share, it would sell at P87 billion “or a whopping difference of P30 billion.”
He said the court decision “curiously” contained a qualification that in case the government decided to sell its share, SMC “shall have the exclusive option to buy the said share at P75 per share.”
“As to why the Supreme Court attached said condition is something that has to be seriously looked into,” he added.
Possible remedy
Asked whether the government would seek a clarification or even a remedy from the high tribunal, Abad said Tañada’s group was “contemplating doing that at the appropriate time.”
Even with the problems keeping the government from using the coco levy assets for the coconut farmers, the budget secretary said the Aquino administration was bent on investing extensively in the industry.
“(The) Aquino administration has identified the coconut industry as one of three agricultural crops/products—along with rice and corn and fisheries—where it will make huge investments up to the end of its term,” Abad said.
“These will be in the areas of massive replanting, extensive intercropping and coco processing. For the latter, there is a huge potential for coco water, coco coir for infra and coco husk for industrial use, among many agri procesing possibilities,” he said.
Budget increase
Abad said coconut is grown in more than 60 provinces and “insurgency is highest in these areas.”
In his letter to the Inquirer, Forbes said that while the final court resolution was being awaited, the Aquino administration had started to “revitalize the coconut industry by increasing the budget of the PCA to an all time high.”
“For its planting program, the fund is increased at least thrice of the 2011 budget good enough for a target of planting 13 million seedlings for the year,” he said.
“Our budget for fertilization increased also at least twice, good enough to fertilize 20 million coconut trees a year. The marching order of (Agriculture) Secretary (Proceso) Alcala is not to rely on the coconut levy and concentrate on the honest and efficient execution of our projects.
“While fertilization programs before were tainted with irregularities, our 2011 fertilization program, which consisted mainly of the use of lowly agricultural salt locally purchased from Mindoro Occidental, was executed without controversy and with savings of at least P20 million for the government. Aside from this the PCA has revived the dying salt industry of Mindoro Occidental.
“We have also begun to fund researches, such as the research on the effect of the use of virgin coconut oil (VCO) on the cholesterol level of its takers. The scientific study and positive conclusion undertaken by the UST Laboratory and interpreted by former Health Secretary Jaime Galvez Tan added in no small measure to the promotion of the product.
“At present, we are already establishing the terms of reference for the research on whether VCO can cure Alzheimer’s disease. PCA is also upgrading its laboratories and research centers to international standards. PCA knows it cannot defend and promote the coconut industry through its replanting and fertilization programs alone. With the President’s shot in the arm, PCA started to widen its horizon on scientific and marketing researches,” Forbes said.