Monday, September 21, 2015

The Philippine Coconut Industry

The Philippine Coconut Industry
Rolando Dy, Ph.D.


This paper seeks to address three objectives: identify and discuss the major problems and issues affecting the current programs in the sector; discuss the effects of government policies and programs (DA and LGU) on the sector and how these policies and programs helped the sector go closer or farther away from the major goals in the AFMA of poverty alleviation, sustainable agriculture,and global competitiveness; and suggest concrete policy recommendations that will ensure government programs to be more attuned to AFMA goals.

The coconut industry comprises the largest farm area (3.3 M ha and 1.4 M farms)in Philippine agriculture. It hosts some 3.4 M farmers and workers (Faustino,2006). Coconut products generate the largest agri-food export. The industry has performed dismally over the years due to several reasons, foremost of which are:the lack of top level resolve, inequitable resource allocation, and implementation constraints. As a result, low productivity prevails and, in turn, high poverty and insurgency.

Problems and Issues Confronting the Current Programs

There are several issues that confront the coconut industry. These include: the lack of top level commitment which has led to a lack of a serious development program for the industry; the severe shortage of long-term financing for perennial crops; resource allocation criteria, which is biased toward rice; institutional issues with the PCA implementing mostly under-funded, short duration programs and implementation problems with limited involvement, if at all, of LGUs, the private sector, the civil society, and the academe; lack of civil society engagement especially in analyzing the whole gamut of problems besetting the sector; global market access such as the campaign of overseas soybean interests against CNO in the US food usage as well as labeling and wrong attribution of the negative impact on all saturated fats, including medium chain triglycerides from coconut oil; and CARP and other laws which have discouraged private investments following provisions on retention limits as well as transferability.

Government Policies and Programs and their Effects on the Sector and AFMA Goals

Government policies are generally biased against tree crops in general, and coconut in particular. First, public sector investments have focused on irrigated rice due to the decades-old drive for rice self-sufficiency. Second, slow implementation of CARP has contributed to investor uncertainties, and militated against investment in long-gestating tree crops. Third, limited grace period for tree crops and the high real interest rates resulting partly from Government macro policies had made investment in long gestating crops unattractive (World Bank, 1999).Further, the age old reliance on the “recovery” of the coco levy fund as a means to develop the industry has also boomeranged. Little funds were allocated by the Government to coconut replanting since 1986.Moreover, the AFMA funding constraint is severely exacerbated in the case of coconut where support is miniscule relative to the needs.

Meanwhile, programs implemented included the World Bank-supported Coconut Farms Development Project (CFDP), DAR’s agrarian reform communities(ARCs) program, and the GMA Coconut program which took off from the Maunlad na Niyugan Tugon sa Kahirapan Program, and the development of two million ha of agribusiness lands in order to create two million jobs under the MTPDP where 1.35 million ha will be in coconut lands. The focus has mainl ybeen on increasing the productivity and income of farmers through replanting,fertilization and rehabilitation, as well as implementation of coconut-based arming systems.

Overall, however, the policies and programs of the coconut industry were characterized by lack of sustained directions and funding.The “low intensity” approach to solving the problems of the coconut industry meant lost opportunities in the last two decades especially in the areas of poverty alleviation, global competitiveness, sustainable development, rational use of resources, and people empowerment. It is a sad commentary of what development management is not. Coconut provinces continue to be equated with high poverty and, in many cases, insurgency. Vast areas of lands generate low returns. The coconut industry is not globally competitive due to failure to put in place competitive strategies and actions. Agriculture is under threat as many coconut regions are unable to provide good incomes. In the process, out-migration becomes the option for the rural poor.

Intercropping for Coconuts

The Philippine Coconut Authority released a paper regarding intercropping as early as 1999. It was written by Dr. Severino S. Magat, Scientist IV of the Agricultural Research and Management Department, Philippine Coconut Authority. The proposed intercropping and primary product diversification is called Enhancement of Economic Benefits from Selected Coconut based Farming Systems (CBFS) Practices and Technologies.

The main crops for intercropping are the following:

1. Corn (Maize)

Under the coconut + corn cropping, with the achievable yield of coconut of 2 tons copra (8,000nuts/ha) and 5 tons of corn grains (2 croppings/yr), the annual total investment of PHP22,050 (US$452.7) could generate a net income of about PHP42,950 (US$881.9), and a benefit-cost ratio (BCR) of 2:1

2. Banana (Saging na Saba variety)

a 5-year cropping period, the average annual direct investment cost of PHP18,000 per ha
generates a total net income of PHP434,000 (US$8911.7)/ha. The BCR increases from year 1 to 5, meaning: at year 1 = 1; year 2 = 4.0; year 3 = 5.7; year 5 = 7.1

3. Coconut Multi-storey cropping (Coconut, papaya, pineapple and peanut)

 For a 3-year cropping cycle of this multi-storey CB FS with papaya, pineapple and peanut as component intercrops, covering a total of 2.5 ha effective land cropping area (coconut = 1.0 ha, papaya = 0.50 ha, pineapple = 0.50 ha and peanut = 0.50 ha), with an investment of about PHP63,838 (US$1310.8) per ha of coconut land, it generates an annual estimated total net income ofPHP132,409 (US$2,719) per ha Under the production costs and commodity prices used, an average BCR of 3.43 is achievable.

4. Rootcrops

Among the root crops recommended under CBFS are: cassava, gabi (taro), ubi (yam) sweet
potato and ginger under acceptable ages of 1 - 6 years and 26 – 60 years-old trees. These intercrops can be intercropped in spaces under the inter-rows of coconut (8 – 10 m, square and triangular planting arrangements) as well. Spacing followed a re: 1) cassava – 0.75 – 1.0 m (rows) and 0.50 – 0.75 m (hills); 2) sweet potato – 0.75 – 1.0m (rows) and 0.25 – 0.50 m (hills)

Based on a hectare basis with a land use intensity of 1.75 ha (1 ha coconut, 0.40 ha cassava and 0.35 ha sweet potato, a total annual net income of PHP31,198 (US$640.6) is generated for this CBFS

5. Coffee

Using coffee excelsa variety grown under coconut (spaced 9 – 10 m square), at full-bearing stage (5 – 6 years), net income from coffee trees (2 tons bean yield/ha per year) is PHP80,566 (US$1,654) or a total net income (coconut and coffee) of: PHP 103,805 (US$2,131).

* This data came from and is to be updated.

Coconut Levy


In 1973 the Philippine Coconut Authority was empowered to collect a levy from coconut millers for the benefit of the coconut farmers. In 1974, the COCOFED took control of the PCA governing board. In 1975, the PCA acquired control of a bank and renamed it the United Coconut Planters Bank (UCPB) to service the needs of the coconut farmers. Levies collected by the PCA were deposited into the bank initially interest free. The President of the Bank was Eduardo Danding Cojuangco and Juan Ponce Enrile as the Chairman.[1]

In 1983, due to a power struggle in the management of San Miguel Corporation, Enrique Zobel sold 19.5% of his San Miguel shares to Eduardo “Danding”Cojuangco who use the Coco Levy funds of UCPB to buy them and effectively took control of SMC. When Andres Soriano II passed away in 1984, Eduardo “Danding” Cojuangco took the chairmanship of SMC. This was cut short in 1986 by the EDSA Revolution where the government sequestered the shares of UCPB in SMC.

From the time the coconut levy was imposed up to 1982, total collections reached P9.7 billion. The money was sequestered by the PCGG in 1986 in response to protests from NGOs and POs on the unconstitutionality of the private character of the funds. They cited two grounds namely: (a) only the government has the sole authority to impose a tax and (b) the levy collected cannot be sued for private purposes. The COCOFED, on the other hand, counter filed, a case before the Supreme Court questioning the sequestration move by the PCGG. They claimed that the coconut is private property with the coconut farmers as owners. Until now, the issue has not been resolved and the funds are still sequestered and frozen.The controversy regarding the coconut levy actually resolves around two major issues – fund character and ownership. The levy was originally intended as public fund to be used for financing the capital requirements of the coconut industry. However, through “legal and political maneuverings,” the fund became private in nature. While then President Ramos issued executive Order No. 277 declaring the funds as “affected with public interest,” the EO did not categorically state that the fund is public. The Supreme Court later declared that the levy funds belong to the government.In a landmark decision rendered recently (2004?), the Sandigan Bayan upheld two important decisions of the Supreme Court declaring the levy funds as belonging to thegovernment (Romero, 2005).Recent events indicate willingness by various parties for compromise in order to finally resolve the issue and unblock the funds which from various estimates are valued at Php 50 toP100 billion for the San Miguel shares and other CIIF assets. A farmer leader indicated (June 2006) that there is need to resolve the 8 Civil Cases (No. 0033-A to H) at the Sandigan Bayan to finally unblock the levy funds.

In 2012, the Supreme Court ruled that 27% off SMC belonged to the coconut farmers. [2]
*The ruling is still appealable.

About the Author

The Mail Man

Author & Editor - The Philippines' Web Magazine on Agriculture.

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