Here’s how to resolve the legislative impasse over the coconut levy funds

Published February 29, 2020, 12:00 AM

by manilabulletin_admin

Dr. Emil Q. Javier
Dr. Emil Q. Javier

After 33 years of litigation, the coconut levy funds (CLF) in the National Treasury and the sequestered stocks of San Miguel Corporation and other assets acquired from the taxes collected from coconut farmers and the coconut industry remain inaccessible to the intended beneficiaries.

Congress in late 2018 responded to the President’s election pledge to make the CLF (and assets) available to the coconut farmers and industry by enacting two bills:

The first bill will create a Trust Fund out of the CLF and vest into a cabinet-level entity (the Coconut Farmers and Industry Trust Fund Committee, CFITFC) the authority to manage and otherwise exercise on behalf of the National Government all rights and incidents of ownership to the coconut levy assets.

The second bill will reorganize the Philippine Coconut Authority (PCA), expand its board’s membership to include more coconut farmers and industry representatives, and include in the PCA mandate the implementation of CLF-funded projects approved by the CFITFC.

However in February, 2019, President Duterte sent the two bills back to Congress without his signature. In his veto message to Congress, the President expressed three reservations over the bills as submitted:

The first reservation was the effectively perpetual life of the Trust Fund which in his opinion was probably violative of the Constitution.

Our recommendation is to adopt the Senate version of the bill which limits the life of the Trust Fund not to exceed 25 years, after which the balance, if any, will revert to the National Treasury but still to be used exclusively for the benefit of the coconut farmers and the coconut industry. The coconut farmers and industry badly need help NOW, not a half century hence. Anyway the balance still accrues to the original beneficiaries. Besides the value of the principal will be significantly eroded over a long period by inflation.

The President’s second reservation was over the lack of limit to entitlement by large coconut farmers who will disproportionately benefit from the CLF, more than the small coconut farmers who desperately need the government’s affirmative action.

Our recommendation is not to set arbitrarily a limit to the farmed areas eligible to CLF support but to make the distinction between the uses of the Fund and link entitlement thereto.

All farmers regardless of size of holding should be eligible to productivity-enhancing and value-adding support which partake the nature of public goods because of their economy-wide, spill-over impacts.

However, for social protection measures which partake the nature of private goods like direct food subsidies, health, accident and life insurance, and educational benefits to coconut farmers’ descendants, only coconut workers and farmers owning/cultivating less than five hectares should be entitled.

Apprehension over
the excessive delegation
of powers to the PCA

The third concern of the President as stated in the veto message was the “broad powers” given to the PCA undermine relevant regulations and safeguards that were established precisely to avoid abuses.

Ironically, the President’s apprehension in this regard is misdirected because the bi-cameral bill submitted to him prescribed that the Trust Fund be managed and invested by the CFITFC. This committee, NOT PCA, will exercise on behalf of the National Government all rights and incidents of ownership to the Coconut Levy Assets.

This new, rather large entity will be composed of six cabinet members, the PCA administrator, seven coconut farmers from the regions plus two coconut industry representatives (16 members in all). It will report directly and be accountable to the President.

PCA’s role is to provide the initial secretariat support to the CFITFC and merely implement whatever projects the CFITFC may assign to it.

Even the role of drafting the Coconut Industry Development Plan was taken away from PCA and entrusted to a separate Ad Hoc Committee reporting to the CFITFC. This equally unwieldy body will be composed of 10 cabinet members, 12 regional coconut farmer representatives and one coconut industry representative (23 members).

Actually, it was fortunate the President vetoed the coconut levy measures because the creation of a new separate national agency with a mandate over the coconut sector is superfluous and will only create a bureaucratic nightmare and spawn continuing tension between it and the PCA. The creation of a separate Ad Hoc Committee to prepare the Coconut Industry Development Plan is likewise redundant because most of the ex-officio Ad Hoc Committee members also sit in the mother committee (CFITFC).

If Congress and the President have lost trust and confidence in PCA, we should abolish PCA, fold in its functions, deserving personnel and assets into the new CFITFC and save ourselves a lot of money and confusion.
But we should not have both!

The more rational approach is as proposed by the Senate — not to create a new agency but vest PCA with the mandate to plan, manage, utilize and invest the coconut Trust Fund. A national agency has to exercise the rights and incidents of ownership over the CLF. If it were not PCA, it has to be another government-owned and – controlled corporation (GOCC). Why not PCA!

If the concern of the President is the potential abuse of corporate powers by PCA, the solution lies in the transparent and judicious selection of the board of directors of PCA. Since all the PCA board members, both the ex-officio cabinet members and the private farmers and industry representatives, are appointees of the President, the onus of performance and accountability of the PCA board is really on the President himself.

In addition to the coconut farmer representatives from the regions and industry representatives (small/medium and large scale processing), Congress may wish to consider including a distinguished scientist of the National Academy of Science and Technology and an experienced corporate manager nominated by the Management Association of the Philippines to introduce independent technological and management expertise into the reconstituted PCA board.

Mandated appropriations
to PCA and earmarking
of use of trust funds

Finally, we recommend strongly that Congress raise the regular annual appropriation of PCA by an amount of not less than ₱10 billion as proposed by the Senate. Coconut occupies an area as large as rice (about three million hectares), employs a similar number of people and our largest agricultural export.

The fact that the coconut sector deserves more is reflected in the humungous disparity in the allocations in the 2020 General Appropriations Act for the coconut subsector vis-à-vis the rice industry. The rice sector is allocated ₱61 billion, broken down as follows: DA Office of Secretary Rice Program, ₱7.0 billion; Rice Competitiveness Enhancement Fund, ₱10.0 billion; National Food Authority rice buffer stocking, ₱7.0 billion; National Irrigation Administration, ₱36.3 billion; and Philippine Rice Research Institute, ₱0.65 billion.

The PCA on the other hand receives a measly ₱1.12 billion.

Moreover, earmarking of the amounts of the use of the coconut levy Trust Fund is misguided. These allocations will be out-of-date in no time. Better that the specific purposes be enumerated but the absolute amounts be left to the judgment of the strengthened PCA board subject to annual review by the Congress Oversight Committee on Agricultural and Fisheries Modernization (COCAFM).

Dr. Emil Q. Javier is a National Scientist and also chairman of the Coalition for Agriculture Modernization in the Philippines (CAMP).

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