"This is the horror story of a heinous crime committed against the poor, hapless coconut farmers. No bloodshed, no physical violence. The perpetuators: an unlamented dictatorial regime, rapacious businessmen and unscrupulous lawyers. Instruments of the crime: shares certificates, presidential decrees, corporate lawyering and lawyer-dummying. Aggravating circumstances: abuse of power, insatiable greed, gross deception and hypocrisy."
The fate of the small coconut farmers is aptly summarized by the legal position paper written by former Solicitor General Francisco Chavez summarized above. They painstakingly bore the exaction of the levy funds, but to this date they have not yet benefited from the fruits of their toil. This is the "crony story" of the greatest social injustice done to at least a third of the Philippine population, -- the small coco farmers and farmworkers.
Historical Background
The coconut levy fund was exacted through a number of Marcos presidential proclamations instituted in 1973 to 1982 for the avowed purpose of financing the development requirements of the coconut farmers and the industry. Proceeds from the coconut levy was envisioned to develop the coconut industry in terms of improving farm production, provision of credit, research and development, insurance, scholarships and integrating production at the farm level with processing and marketing activities. Through political and legal maneuverings, however, the character of the fund was transformed from one that was public in nature, to a "private" fund. The funds were invested and used according to the whims of close Marcos associates, who gained foothold of the coconut industry through the establishment of a coconut monopoly.
From 1973 - 1982, under the Marcos administration, a coconut levy was imposed via Presidential Decree 276 as amended. PD 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 the issuance of a series of other presidential decrees, the original purpose was soon changed to "investment for coconut farmers" and made to appear as "private" funds even though it was exacted from the millions of coconut farmers. The CCSF levy, which started at the rate of P15, ballooned to P100 per 100 kilos of copra during the nine-year period, depending largely on its export price, or P60 on the average. 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 levy collected is valued at P9.7 billion, and is estimated by the Philippine Coconut Authority (PCA) to be worth P100 billion at present. To date, the coconut levy fund has not benefited the small coconut farmers and farmworkers, who carried the burden of the exaction of the levy. This situation stems from the failure of government to resolve the issue of ownership.
How was the Levy Perpetrated?
During the Marcos reign a series of Presidential Decrees, Letters of Instruction and Executive Orders were issued designed specifically for the grand scheme. With the laws on hand and with very little protest coming from the public due to martial rule, his cronies simply helped themselves to the wealth of the coconut industry.
Three institutions were vital to the grand scheme: The Philippine Coconut Authority (PCA), the Philippine Coconut Producers Federation (C0COFED) and the United Coconut Planters Bank UCPB).
PCA. The Philippine Coconut Authority is the sole government agency tasked with the development of the coconut industry and thereby tasked to impose and collect the CCSF levy. Its corporate powers were vested in a Governing Board of seven members: Chairman, three (3) members from COCOFED, one (1) member from the United Coconut Association of the Philippines (UCAP); one member who is owner and operator of the Bugsuk hybrid coconut seednut farm; and, the President of the Philippine National Bank. Contrary to the avowed purpose of the PCA with the coconut farmers as the intended beneficiaries, the composition of the Governing board were all COCOFED connected, except for the PNB President.
COCOFED. The Philippine Coconut Producers Federation is an organization of landlords and businessmen. It was the only recognized organization representing the coconut farmers. The series of presidential decrees assured COCOFED of its share in investments from the CCSF. The Cocofed Marketing Corporation (COCOMARK), a subsidiary of the COCOFED, also spent levy money for areas unrelated to the industry, such as urban real estate. Much of its expenses for its Directors were not properly accounted for.
UCPB. The establishment of this bank was made possible also through a Marcos presidential decree. Coco levy funds were used by the PCA to set up this bank. The United Coconut Planters Bank acted as the financing arm entrusted with a substantial portion of the levy funds. Then later, the Coconut Industry Development Fund (CIDF) and the Coconut Industry Investment Fund (CIIF), both coming from the mother CCSF, were proclaimed. In effect, farmers' money were deposited to UCPB interest free. The mandated purpose was to provide " permanent solution to the perennial credit problems of the coconut farmers" (PD 755). The CIDF was used to fund the development of the Bugsuk Hybrid Seednut Farm owned by Danding Cojuangco, Jr. The project was a flop but it siphoned in huge amounts from the levy estimated to be P460 million a year.
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. Coconut trading firms, coconut oil mills, processors and exporters firms were bought with the levy money. This gave way to yet another conglomerate, the United Oil Mills (UNICOM). But the most prized and questionable was the acquisition of 33 million shares in San Miguel Corporation. The move virtually permitted Cojuangco to control more than 60% of SMC shares. The ACCRA Lawyers were active in this takeover as they were with UNICOM. ACCRA Lawyers and current political figures backstopped Cojuangco in all these deals. While coco levy funds were used to buy shares, Cojuangco did not appoint coconut farmers to the Expanded SMC Board. The slots were given to the ACCRA partners instead.
All of these three institutions were ran and managed by an interlocking directorate composed mostly of close Marcos associates (some of them still remain very influential political figures in seats of power like Congress and the Senate). With PCA, COCOFED and UCPB backstopping each other, setting up the monopoly of the giant industry merely required one stroke of a hand. It did not take long for the Marcos cronies to corner the financing supply, manufacturing, and trading business of the industry. Finally capping the monopoly was an issuance of another Executive Order in 1982 banning coconut exports. Only the Cojuangco group of companies were allowed to export. In 1983, a Presidential Decree granted sole rights to the Cojuangco-owned UNICHEM to import petrochemical materials for use in its products.
Marcos tried twice to cloak the coco levy from the ire of the coconut farmers and the general public. In 1976, PD 961 worded the levy "to come from copra exporters, oil millers, dessicators, and other end-users of copra." In 1980, due to growing protest from the coconut farmers, he issued PD 1699 suspending the levy with respect to millers and dessicators but continued the collection with respect to exporters. 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 copra price, 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.
The Small Coco Farmers' Struggle to Recover the Coconut Levy Funds
Upon assumption to power, the Aquino administration sequestered the shares of companies acquired by the Marcos cronies through the coconut levy funds. And in 1987, graft cases against individuals who have misappropriated the coco levy funds have been filed by government at the Sandiganbayan and the Supreme Court. To date, perpetrators of what has been dubbed as the greatest social injustice done to millions of small coconut farmers and their families, remain unpunished and continue to enjoy economic and political influence.
Furthermore, the nature of the coconut levy funds, whether public or private, remains unresolved for the last 13 years. The Supreme Court, however, stated that "...the coconut levy funds are clearly affected with public-interest (Philippine Coconut Producers Federation Inc. (COCOFED) v. PCGG, GR No. 75713, 2 October 1989, 178 SCRA 236). But this decision does not categorically define the nature of the levy funds. The Supreme Court passed the burden of the resolution of the nature of the funds to the Sandiganbayan. To this very day, the small coconut farmers still wait for justice to be served.
There were many attempts made by pro-people legislators like former Congressman Oscar Santos, Congressman Wigberto Taņada, former Senator Romulo and many others to resolve the controversial coconut levy issue through legislation. Several bills were filed aimed at declaring the coco levy funds public for the development of the coconut industry and for the service and benefit of the small coco farmers whose toil helped built up the fund. But well-entrenched interests in Congress successfully blocked these legislative efforts.
The small coconut farmers' struggle to recover the levy funds has been long and arduous. But they have won significant gains in their efforts to recover the funds, so that it will finally be used for its original intent and purpose. President Ramos issued Executive Order (EO) 277 in September 1995 and EO 481 in May 1998, which directed the mode of treatment, utilization, management and disposition of the coconut levy. Although several legal questions have been posed on the implementability of these EOs, still they provide opportunities and openings that will benefit the small coconut farmers.
There are also indications of good opportunities and openings for legislative advocacy in the current Congress given 138 new congressmen (first-timers) and a handful sectoral representatives elected through the Party list system.
However, the small coconut farmers now face greater challenges before they may be able to reap the benefits that may be made possible by these EOs. The realization of these EOs and the implementation of pro-small coconut farmer policies will meet strong opposition from a few but powerful economic and political entities involved in the coco levy controversy, now close to the Estrada Administration.
Several individuals who perpetrated the coconut levy scam and the misappropriation of the levy funds now hold key government positions that can influence the outcome of the coconut levy issue. Former Senator Angara, who was part of the ACCRA Law Office that served as legal arm for institutionalization of the levy, now heads the Department of Agriculture. The current head of the Philippine Coconut Authority, Administrator Eduardo Escueta, is a COCOFED-member, served as Cojuangco's lawyer and Angara's former chief of staff. To top it all, Eduardo "Danding" Cojuangco, known as one of the biggest supporters of President Estrada in his presidential campaign, has again gained control of key levy-funded institutions --- the UCPB, CIIF and San Miguel Corporation.
Concrete moves made by Cojuangco confirm the small coconut farmers' fears. News reports say Cojuangco had asked President Estrada to revoke EO 481 and just to allow the courts decide on the coconut levy case. If this pushes through, the small coconut farmers may have to wait for another decade before the nature is resolved by the courts or may never get the justice they deserve.
The recent publicized moves by Cojuangco to strike a settlement with the Estrada government raise fears that a one-sided compromise at the expense of the small coconut farmers is in the offing. Based on the compromise, Cojuangco gets to retain his shares in UCPB and his 20% share in SMC, both allegedly purchased through the coco levy funds. The deal is being rushed in time for Pres. Estrada's state-of-the-nation address slated on 26 July 1999 and has been going on without any consultation or participation from the real stakeholders. However, due to mounting pressure from the small coco farmers' group the Estrada administration did not push through with the the compromise. The Estrada government is now looking for a "win-win" solution on the levy issue.
PKSMMN, for its part, together with many other support NGOs and POs is now working to build solidarity and unity with groups from all sectors in society, both domestically and internationally, to lend support in this landmark social justice issue.
