Coconut production constitutes one of the four major sectors of Philippine agriculture, the others being rice, corn and sugar. Coconut is planted in 2.7 million hectares, which accounts for 23% of the total croplands, and 74% of commercial croplands. In comparison, sugar accounts for only 5% of croplands and 15% of commercial crops, while rice and corn account for 30% and 28%, respectively, of total croplands.
About 85% of coconut production is exported in the form of copra, coconut oil and dessicated coconut. Copra is the dried meat of the nut, with moisture removed by sun-drying, or by artificial drying. It is processed on the farm level, using simple manual tools and equipment. Coconut oil is extracted from copra through mechanical and chemical processes, using capital-intensive industrial equipment. Coconut oil is valuable as a raw material for a wide array of industrial commodities such us margarine and soap, as well as lauric acid or glycerine-based industrial chemicals. Copra meal (or pellets) is what remains after oil is extracted from copra. Dessicated coconut is the shredded or watered white kernel of mature nuts dried to make it edible for a longer period of time.
In the period before World War II, exports of coconut products accounted for about 20% of total Philippine exports. It rose to 35% of exports in the 1950's and 1960's, and dropped to about 20% in the 1970's. In 1979, export earnings from coconut products amounted to $878.35 million (coconut oil, $675.56 million; copra, $114.61 million; dessicated coconut, $88.18 million), accounting for 23% of Philippine export earnings. Coconut products in the 1970's has been the country's top raw-material export, followed by mineral and forest products.
Since the 1920's up to the early 1970's, about 61% of these exports were in the form of unprocessed copra; coconut oil and dessicated coconut accounted for about 29% and 10%, respectively, of the value of coconut exports. In the beginning of 1974 however, coconut oil has gradually accounted for the bulk of coconut-based exports. By 1979, coconut oil accounted for 77% of the total value; copra 13%; and dessicated coconut, 10%. Other coconut products, such as coconut shell charcoal, coir (coconut fiber), and activated carbon, have accounted for only an insignificant portion of the value of all coconut products. Of the total value of coconut exports in the latter half of the seventies, 39% went to the U.S., 46% to Western Europe, and the rest to the countries such as Japan and Russia.
About one-third of the Philippine population depends mainly on coconut production for its livelihood. In light of this, it is obvious that the coconut industry is of crucial importance.
It was the Spanish colonizers who laid the groundwork for the coconut industry. The Spanish expanded coconut production beyond the colonized people's natural needs through an edict in 1642 which required each indio (filipino natives) under severe penalties, to plant 200 coconut trees. This was mainly because charcoaled coconut shells were used for the caulking of the Spanish galleons, while coconut husks were used for making fiber for galleon rigs. The 1642 edict however, required only a relatively small increment of land to be brought into coconut cultivation while new plantings were undertaken only in unused lands adjacent to the existing croplands.
Coconut products were first reported between 1854 and 1880. Copra exports accounted for 5% of total exports in 1899, and rose to 22% by 1909. This was the period when the emerging soap and margarine industries in Great Britain, Germany, France and The Netherlands, required a cheaper source of raw materials. The increase in coconut exports was also attributed to the invention of margarine in Europe. The butter-trading firms in the 1870's turned towards margarine production to supply the urban working class market who found it difficult to afford the price of butter.
When Spain turned over the Philippines to the United States at the turn of the 20th century, the US dominated right away the production of several types of major oils and fats. The increased profitability of coconut oil production in the country had important consequences with regard to the operations of U.S. capital in the coconut industry. On the whole, U.S. preferential treatment for coconut exports, and the entry of copra into Western Europe duty-free, had much to do with the entrenchment and expansion of the coconut industry in the Philippines. During the early part of the 1930's under the Philippine Commonwealth, U.S. agricultural groups' campaign to restrict coconut products resulted in the 1934 Internal Revenue Act. It placed a 3-cents per pond processing tax and an additional 2-cents per pound excise tax on imported vegetable oils, including coconut oil. A provision of the 1934 Act had important consequences for the coconut industry – that proceeds of the excise tax be turned over to the Philippine Commmonwealth (thus providing it with an unusual large revenue) on one condition: 'That such payments were to cease if the Philippine Government provided any subsidy to be paid to the producers of copra, coconut oil or allied products.' This provision was a cover-up for the fact that the excise tax on Philippine exports was in violation of the free-trade arrangements between the U.S. and the Philippines. The Act created a wedge between the Philippine state, which had sustantial control of financial resources, and the coconut industry, to the advantage of U.S. and British firms, as well as few Chinese firms dominating oil-processing and copra exportation.
The Philippine Coconut Federation Inc. is a private, non-stock, and non-profit organization, founded by coconut planters and politicians in Southern Luzon in 1947. The leadership was later taken over by landlords, businessmen and politicians.
The Philippine Coconut Authority (PCA) was created on 30 June 1973 (through Presidential Decree (PD)232) as the sole agency tasked with the development of the coconut industry. In December 1974, P.D. 623 was signed into law by then President Marcos specifying that the PCA's Governing Board shall composed of a chairman, three (3) members of Cocofed, one (1) member who is the owner of the Bugsuk Hybrid Coconut Seed Farm (represented by Mr. Eduardo "Danding" Cojuangco) and the President of the Philippine National Bank. Then Defense Minister Juan Ponce Enrile became chairman of the PCA Board, Maria Clara Lobregat and Jose Eleazar both of Cocofed were two Board directors.
Section 1 of P.D. 232 states that the purpose of the PCA was " to promote the accelerated growth and development of the coconut and other palm oils industry so that the benefits of such growth shall accrue to the greatest number". In contrast, the Governing Board of the PCA were almost all connected to Cocofed (except for the the PNB President).
There are two kinds of Coconut Levies, these are: the Cocofund Levy and the Coconut Consumers Stabilization Fund (CCSF) Levy
The Coconut Investment Fund (COCOFUND) was established on 17 June 1971 under Republic Act (RA) 6260. The Cocofund was established to create a Coconut Investment Company (CIC) which is owned, capitalized (at PhP 100 million) and administered by the coconut farmers. Under RA 6260, a levy of PhP 0.55 per 100 kilos of copra was imposed for a period of 10 years. For this purpose, a Cocofund receipt was to be issued at the first sale
P.D. 276 states that "a levy, initially, of P15.00 per 100 kilograms of dried copra resecada or its equivalent in other coconut products, shall be imposed on every first sale," effective 20 August 1973. This levy, called a coconut stabilization levy, was by design made a private fund to escape audit by government. Initially, this levy was meant to subsidized coconut products for domestic consumption. This expressed purpose did not, however, last long. Soon enough, the purpose was changed to "investment for coconut farmers". Apparently, the real agenda was to rake in enormous wealth and power at the expense of the coconut farmers. The CCSF levy, initially at P15.00/ck of copra, reached a maximum of P100.00/ck of copra during the period of 9 years ending August 1982. The total fund collected was reported at P9.695 billion. It could have been more if everything was religiously reported. Oftentimes, the collectors of the levies would give the farmers a receipt for the Cocofund Levy (P 0.55 per 100 kilos of copra) and claim that this also covered the CCSF levy (which was P15.00 or more per 100 kilos of copra).
The Coco Levy was imposed upon the country's coconut farmers from August 1973 to August 1982, all during the Marcos regime, Through its 9-year span, it garnered an amount of P9.7 billion. The avowed benefits of this levy have yet to be felt by the 18 to 20 million Filipinos dependent on the country's coconut industry for their livelihood. A series of Presidential Decrees, Letters of Instructions, Executive Orders (EO's) and other measures were all issued in order to effect the grandest scheme in the Philippine history.
Three institutions were the major players in the Coco Levy scheme, these were the Philippine Coconut Authority (PCA), the Philippine Coconut Producers Federation (COCOFED) and the United Coconut Planters Bank (UCPB), which was established in 1975 from the CCSF collections.
All three institutions were ran and managed by an interlocking directorate composed mostly of close Marcos associates led by "Danding" Cojuangco, then Defense Minister Juan Ponce Enrile and Maria Clara Lobregat, (incumbent Mayor of Zamboanga City in Mindanao) and backed by Pres. Marcos and his presidential decrees. Together they institutionalized the cruelest extraction from coconut farmers of billions of pesos in levies. With PCA, COCOFED, and UCPB backstopping each other, it did not take long for the Marcos cronies to corner the financing, supply, manufacturing and trading business of the industry. In 1983, a Presidential Decree granted sole rights to the Cojuangco-owned UNICHEM to import petro-chemical materials for use in its products. The following year, 1984, the majority shares of stocks of San Miguel Corporation were acquired using levy money.
Marcos tried to cloak the coco levy from the ire of the coconut farmers and the general public. In 1976, P.D. 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 P.D. 1699 suspending the levy with respect to millers and dessicators but continued the collection with respect to exporters. This did not change the situation. The coconut monopoly was simply in place and it had the power to dictate 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.
After the fall of Marcos in 1986, the Aquino administration seized most of the shares in companies acquired through the coco levy funds. During the Aquino administration, there were several attempts to recover the multi-billion Coco levy funds and assets. The seized assets were soon under the control of the Philippine Commission on Good Government (PCGG). The PCGG then put its own people in the Boards of the coconut levy acquired firms to replace Cojuanco's.
Since 1987, the government filed cases of graft against the perpetrators of the coco levy scheme with the Sandiganbayan (Anti-corruption court) and the Supreme Court. None as of yet have been decided on. The true nature of the funds, public or private, has also been a long time unsettled issue in the courts. In 1989, the Supreme Court ruled that "the coconut levy funds are clearly affected with public interest" (Cocofed vs. PCGG et. Al. Promulgated October 2, 1989). This, however was a half-baked response and did not have the weight of a clear-cut and categorical decision.
In 1989, concerned members of the Congress filed House Bill #25928 aimed at declaring the coco levy funds public and putting it into the service and benefit of the farmers who were forced to pay it. The landlord-dominated Congress refused to move the bill beyond the Committee level.
In September 1995 President Ramos issued Executive Order 277 which directed that all income, interests, process or profits derived from the levy, as well as assets, properties and shares of stocks procured or utilized, be "administered and managed as public funds". EO 277 also created an ad hoc committee in consultation with representatives of the coconut industry, including coconut farmer's organizations, whose task was to rationalize a Master Plan covering 1995-2000. This directive has hardly gained any concrete momentum largely due to the inaction of the Department of Agriculture. Furthermore it was another half-baked attempt to declare the coco levy funds categorically as public.
For decades, the small coconut farmers had been victims of grave injustice. The products of their blood, sweat and tears have been lavishly exploited by a privileged few in the ruling elite in their power play.
On 31 May 2000 ,"Danding" Cojuangco together with hundreds of coconut farmers reached a deal after 18 years to end a protracted court battle for control of half of the accumulated P100-billion coconut levy assets. The out-of-court settlement will free from sequestration the 27% block of shares in San Miguel corporation of which Cojuangco is chairman.
The compromise will serve as a basis for President Joseph Estrada to sign an executive order lifting the sequestration of SMC shares being claimed by Cojuangco. Cojuangco bought the SMC shares with proceeds from the coconut levy fund during the Marcos regime. The EO will provide the blueprint for the sale and use of the SMC block of shares which the government has valued at P50 billion. To reach the breakthrough, the farmers agreed to give the Cojuangco-affiliated COCOFED a 20% allocation. Earlier reports said that farmers opposed the deal. They insisted Cocofed conspired with Conjuangvo and Marcos to stage the systematic plunder and exploitation of farmers who were subjected to the coconut levy.
But in exchange for yielding ground, the small farmers' groups will be given a 40%
allocation. The remaining 40% goes to the government. Both parties also haggled over the issue
of who would audit the funds.
