Chapter1and2.doc

CHAPTER I INTRODUCTION Background of the Study The Philippine coconut industry is a large pillar of the national, economic and cultural heritage of the country. It is important to the national patrimony, as it is the source of valuable commodity and renewable asset, vital in building a strong nation. The area currently planted to coconut is about 3.565 million hectares or 26 percent of country’s total agricultural lands. Also, 68 out of 81 provinces are coconut-growing areas.1However, the Philippines continues to lag behind India and Indonesia in terms of production, based from the recent study of United Coconut Association of the Philippines (UCAP). About 26 million Filipinos depend on coconut trees for their livelihood. For the marginal coconut farmers, they depend mostly, if not entirely, on coconut for their need for food, clothing, shelter and education for their children. But while the prospects in the global market for coconut products are encouraging, the current situation in the local coconut industry is, however, challenging, if not alarming. The timely intervention by the government on the issues now confronting the local coconut industry would be very crucial for its survival. The coconut levy funds which are now worth about P100 billion upon which coconut farmers had been pinning their hopes for salvation still remain frozen in the national treasury. The bill pending in Congress that will finally provide for the utilization of the funds entrusts the management of the funds with the Philippine Coconut Authority. However, PCA’s charter will have to be amended and that could very well take a year, or forever, if the 45- year saga of the Cocolevy fund is any indication.

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The Supreme Court made emphasis on the importance of the said funds in its ruling from Pambansang Koalisyon ng mga Samahang Magsasaka at Manggagawa sa Niyugan (PKSM MN) v. Executive Secretary, that said funds were raised pursuant to law to support a proper governmental purpose. They were raised with the use of the police and taxing powers of the State for the benefit of the coconut industry and its farmers in general. The COA reviewed the use of the funds. The Bureau of Internal Revenue (BIR) treated them as public funds and the very laws governing coconut levies recognize their public character. In 2012, the Supreme Court also ruled in the case Eduardo Cojuanco,Jr. v. Republic of the Philippines, that a block of shares from San Miguel, UCPB and Oil Mills Group of Companies be given to coconut farmers; however, this has yet to materialize. As the court ruling stressed that the agreement between the Philippine Coconut Authority-Cojuanco Agreement as referred in Section 1 of P.D. 755 was not reproduced or attached to the same law. And wellsettled is the rule that laws must be published in order to be valid, citing the case of Canada vs. Tuvera.3 In this case, the Supreme Court affirms the ruling of the Sandiganbayan in holding that the said agreement shall be treated as an ordinary transaction between agreeing minds to be governed by contract law under the Civil Code. Recently the Senate adopted and ratified bicameral conference committee reports on the bill seeking to set up a P100-billion trust fund for coconut farmers and the bill to strengthen the Philippine Coconut Authority, which will handle the funds. Moreover, many recommendations have been offered as a way of increasing coconut farm productivity and farmers’ incomes with the aim of freeing coconut farmers from poverty. Among these are crop diversification of coconut lands to other crops, the integration of livestock, product diversification, and value adding. All these recommendations are useful but none provide a solution to the problem of the very low yield of the coconut trees, which is the major cause of the farmers’ low incomes, which lead to poverty. Statement of the Problem

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The main objective of this study is to know various amendments of the bill and how these amendments will affect the distribution of the said funds to the coconut farmers. Said creation of the law is set to give hope to the farmers amid the controversies the said fund have been through. 1. What is the current status of the Philippine laws regarding the coco levy fund 2. What are the effects in giving the proceeds A.) Coconut farmers B.) Government 3. What are the justifications for amendment for creating Senate Bill No. 1913 Significance of the Study This section will provide brief description on the significance of the study to different sectors such as the State, the coconut farmers, the public and the future researchers. To the State: This study will provide the government useful information and considerations in enacting laws for the proper distribution of the said assets to the coconut farmers. In effect the law making body of the government will have additional grasp of the current impact of the delayed distribution of the fund to the marginalized coconut farmers. To the Coconut Farmers: This study will help them to be up to date of the recent developments of the bill being enacted in the Congress. Furthermore, the said topic is geared towards helping our coconut farmers in informing them of what is due to them, which some of them were no longer taught of what they were bound to receive as beneficiaries. Unfortunately ,even though Supreme Court have laid down several decisions emphasizing that said funds were special funds allocated specifically to them, still our farmers remain empty handed. To the Public: This study will serve as an eye opener to the public as to the current situations of the coconut industry in the Philippines as well the impact of said Cocolevy fund

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issue to the society’s interest towards transparency in government’s projects in future generations to come. It will help them understand the poor condition of the coconut farmers and its impact to the economy of the Philippines, being one of the major producers of the coconut in the world. To future researchers: This study will serve as a future reference to researchers who share the same area of interest. This study can also open in the development of this study. Scope and Delimitation The scope of the study is limited to discuss the various implications of the said Senate Bill 1913 when it repealed PD 1468. It is also to discuss the importance of the coconut industry to the Philippine economy and to propose long term achievable solution which will help the coconut farmers to be competitive in the market. Definition of Terms 1. P.D. No. 276 - established the Coconut Consumers Stabilization Fund (“CCSF”) and declared the proceeds of the CCSF levy as trust fund, to be utilized to subsidize the sale of coconut-based products, thus stabilizing the price of edible oil. 2. P.D. No. 582 - created the Coconut Industry Development Fund (“CIDF”) to finance the operation of a hybrid coconut seed farm. 3. P.D. No. 755, under its Section 2 - authorized PCA to utilize the CCSF and the CIDF collections to acquire a commercial bank and deposit the CCSF levy collections in said bank interest free, the deposit withdrawable only when the bank has attained a certain level of sufficiency in its equity capital. The same section also decreed that all levies PCA is authorized to collect shall not be considered as special and/or fiduciary funds or form part of the general funds of the government within the contemplation of P.D. No. 711.

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4. P.D. No. 961 - codified the various laws relating to the development of coconut/palm oil industries. 5. United Coconut Planters Bank - bank created thru the enactment of Presidential Decree 775 (or P.D. 775) where President Ferdinand Marcos in July 29, 1975, instructed the Philippine Coconut Authority (PCA) to "formulate and recommend for adoption credit policies affecting production, marketing and processing of coconut and other palm oils" and "to provide readily available credit facilities to the coconut farmers at preferential rates." 6. Philippine Coconut Producers Federation, Inc. (COCOFED) - confederation of associations/organizations involved in the various activities of the coconut industry. 7. Philippine Coconut Authority - is the sole government agency that is tasked to develop the industry to its full potential in line with the new vision of a united, globally competitive and efficient coconut industry. 8. Coconut Farmers - group of people engaged in planting and sowing of coconut by products. 9. Trustee - an individual or corporation named by an individual, who sets aside property to be used for the benefit of another person, to manage the property as provided by the terms of the document that created the arrangement. 10. Beneficiary -is a person or entity who receives a profit, advantage, or benefit.

CHAPTER II REVIEW AND RELATED LITERATURE

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The colorful history of the Philippine coconut industry is twined to the important chapters of history not only of the nation but also the world itself. The five vital phases of emergence and growth of this industry are categorized as follows: (1) the periods of emergence (2) the American Colonial period; (3) the post-independence period; (4) the levy period and the (5) present. Emergence of an Industry - Spanish Colonial Period (1521-1849) The Spanish colonial government issued edicts decreeing the planting of coconut in the country, even stipulating the number of trees planted according to social classes and imposing on each adult the planting in an area of at least 200 sq. ft. This period also saw the introduction of crude and oil processing, the exportation of the husked nuts and copra and increased use of coconut in the manufacturing of margarine and explosives. American Colonial Period (1900-1946) The period of world depression in the early 20th century cut back the demand of coconut products despite its preferred position in the U.S. market, which has acquired a taste of margarine. The two world wars ushered post-war depressions which was most acute after the First World War. This saw the closure of many mills as demands for coconut-based products declined. This period also saw the imposition of a U.S. cent excise tax on the called “coconut cow,” which was perceived to be a threat on the U.S. dairy industry.

Post-Independence Period (1946-1973) This period saw the recovery of the industry which also saw high prices and more processing witnessed by the proliferation of the coconut oil processing and expansion of coconut

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desiccating industry. The period of import and exchange controls also witnessed the promotion of barter trade and export undervaluation in the face of the fixed unrealistic exchange rate. Coco-Levy Period (1973-1986) The early seventies saw a commodity boom that pushed up the price of the coconut products to unprecedented heights. This prompted the imposition of levies ostensible to float Coconut Investment Company (CIC), the fist levy amounting to P150 million, a Coconut Consumers Stabilization Fund (CCSF), to Coconut Industry Development Fund (CIDF) to promote a vertical integration of the coconut industry. Post-Levy Period (1986-2000) This saw the end of the levy collections and the restoration of the market forces through the dismantling of the Unicorn monopoly. A series of litigation and judicial decisions led the government to re-conversion of the “privatized” fund to the government by the Supreme Court. This also saw the proliferation of small coconut farmers organization and attempts at replanting and farm rehabilitation with the support of the World Bank. The Philippine Coconut Industry The coconut industry is the 4th largest contributor to GVA of the Philippine agriculture, there are about 3.5 million coconut farmers and 7,300 traders which help hand in hand in creating and keeping alive the said field. About 26% of total agricultural land were used to coconut farming far more small to other lands used in other agricultural crops. Throughout the Philippines, the coconut is consumed and utilized in a variety of ways. Coconut leaves are often used to wrap rice for cooking and used in its subsequent storage in packets known as “puso.” Coconut milk, coconut jam and so-called coconut sport fruits, sweetened meat of the copra that is sliced and severed in strings, are all popular forms of consuming coconuts.

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Although the Philippines produced an impressive 15.2 billion-nut equivalent and 2.5 million metric tonnes of coconuts (in copra terms) during 2011, according to the PCA, the organization noted that the output is only 30 per cent of potential capacity which gives more reason to create solutions to this recurring problems of the coconut farmers. There were several laws and organization/s created such as: 1. COCOFED Historically the Philippines is an agrarian society in which traditional social and economic status has long been dominated and affected by its political system. A group of coconut hacienderos in Southern Mindanao were able to organized COCOFED Group which were able to solicit barter privileges from the government, which lucrative business in the period of export and import were made. The COCOFED and its allies worked hard to push the first coconut levy in 1971. 2. Republic Act No. 6260 The first of the levy is the so-called Cocofund Levy mandated by Republic Act No. 6260, known as the Cocofund Law. This law provided for the collection of a levy of P 0.55 per 100 kilos of copra produced to be imposed for 10 years starting 1972. The collections made were to be used to establish Coconut Investment Fund. The CIC was envisioned as a company owned, capitalized and administered by those deriving their livelihood from the coconut industry. Under Cocofund Law, the CIC shares of stock were distributed to coconut farmers / landowners in exchange for Cocofund Receipts. 3. Presidential Decree No. 276

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P.D. 276 established the Coconut Consumers Stabilization Fund (CCSF) which imposed on every first sale a levy of P 15 per 100 kilos of copra or its equivalent on other coconut producers. This was promulgated on August 20, 1973 because of dislocation in price and supply caused by abnormal situation in the world market. 4. Presidential Decree No. 414 On April 19, 1974 PD 414 was created which later created Coconut Consumers Stabilization Fund, the proceeds of which were deposited to Philippine National Bank. Said funds were utilized to provide a subsidy to coconut farmers. 5. Presidential Decree No. 582 PD 582 was created to establish another fund, the Coconut Industry Development Fund. The fund was intended to finance the establishment and operation of hybrid seed farms. The law authorizes the National Investment and Development Center to negotiate to any private person to ensure the country shall have the earliest possible time a continuous supply of seeds. 6. Presidential Decree No. 755 This law improved the implementation of the agreement for the aquisition of commercial bank for the benefit of the coconut farmers. 7. Presidential Decree No. 1468 This was established to reimpose the two levies (1) CCSF Levy and (2) CIDF Levy. 8. S.N. 1913 An act authored by Senator Cynthia Villar to further strengthen the Philippine Coconut Authority which repealed P.D. No. 1468. Its purpose is expressed in its explanatory note which provides that it is to make PCA responsive to the needs of the coconut farmers by making

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coconut industry more competitive and most importantly to safeguard the P100 Billion cocolevy fund in the national treasury. Siquijor lone district Representative Rav Rocamora filed a companion bill to the proposed Coconut Farmers and Industry Trust Fund Bill, which has been approved by the bicameral conference committee. The proposed measure, House Bill No. 8062 (An Act Reconstituting the Governing Board of the Philippine Coconut Authority, providing for Greater Coconut Farmers’ Representation, Amending for the Purpose Presidential Decree No. 1468) will strengthen the representation of coconut farmers in the Philippine Coconut Authority’s (PCA) governing board so that they can effectively participate in the crafting and implementation of the Coconut Farmers and Industry Development Plan. He stressed the urgency by which Congress must pass the proposed measure otherwise the Coconut Farmers and Industry will become a half-baked law. “This proposed bill is necessary in order to effectively implement the Coconut Farmers and Industry Trust Fund Bill should it become law. Without our companion bill reconstituting the PCA, the very spirit of the Coconut Farmers and Industry Trust Fund Bill will remain unfulfilled.” Levy-Funded Projects The levies were supposed to address the following problems: 1. The under-productivity and inefficiencies in the production and processing; 2. the marketing system and, 3. the gaps in the financial system which forces the farmers into high cost money lending of credit institutions.

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Given these problems, forms of intervention were made such as the Bugsuk Island development to take care of the hybridization and replanting program. The creation of United Coconut Planters Bank (UCPB) to answer for farmers’ credit needs and the CIF to provide longterm funds to accelerate capitalization of the industry. Recent Supreme Court Rulings 1. Republic vs. COCOFED, G.R. No. 147062-64, December 14, 2001 In this the pivotal issue discussed by the Supreme Court is whether the PCGG can vote the sequestered UCPB shares. The Supreme Court ruled that the Sandiganbayan committed grave abuse of discretion in grossly contradicting and effectively reversing existing jurisprudence, and in depriving the government of its right to vote the sequestered UCPB shares which are prima facie public in character. As the coconut levy funds are not only affected with public interest, but are in fact prima facie public funds, the Court believes that the government should be allowed to vote the questioned shares, because they belong to it as the prima facie beneficial and true owner.

2. Eduardo Cojuanco Jr. vs. Republic of the Philippines, G.R. No. 180705, November 27, 2012 The Supreme Court made emphasis that publication is an indispensable condition for the effectivity of the law. That the PCA-Cojuanco Agreement was not reproduced or attached as an annex to the law. Furthermore, PD 755 did not in any way reproduce the exact terms of the contract decree hence, the Supreme Court cannot extend to the status of the said agreement the status of a law. The Court merely treated it as an ordinary transaction between agreeing minds to be governed by the Civil Code.

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3. Philippine Coconut Producers Federation, Inc. (COCOFED) vs. Republic of the Philippines,G.R.No.178193,January24,2012 By parity of reasoning, the adverted block of SMC shares, acquired as they were with government funds, belong to the government as, at the very least, their beneficial and true owner. We thus affirm the decision of the Sandiganbayan on this point. But as we have earlier discussed, reiterating our holding in Republic v. COCOFED, the States avowed policy or purpose in creating the coconut levy fund is for the development of the entire coconut industry, which is one of the major industries that promotes sustained economic stability, and not merely the livelihood of a significant segment of the population.

Foreign Jurisprudence

1. James vs United States 63 Argued: November 17, 1960

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Decided: May 15, 1961

In the Supreme Court of the United States a decision was made on a union official who, with another person, embezzled in excess of $738,000 during the years 1951 through 1954 from his employer union and from an insurance company with which the union was doing business.

Likewise unimportant is the fact that the sufferer of extortion

is less likely to seek restitution than one whose funds are embezzled. What is important is that the right to recoupment exists in both situations. To have a property interest in a governmental benefit, including employment, an individual must have an entitlement to the benefit.( Board of Regents v. Roth, 408 U.S. 564, 577, 92 S. Ct. 2701, 2709, 33 L. Ed. 2d 548 (1972). Such entitlements are created by "rules or understandings" that stem from an independent source, such as relevant statutes, regulations, and ordinances, or express or implied contracts. (Id; Perry v. Sindermann, 408 U.S. 593, 92 S. Ct. 2694, 33 L. Ed. 2d 570 (1972). Synthesis of Review Related Literature The literatures cited by the researchers focused on the collection and constitutionality right of the farmers. The proposed ways of collection regarding the funds under the controversial coco levy funds The researchers cited Philippine jurisprudence, which held that truly the right to disburse the funds are in the grasp of the government which is under the Presidential Commission on Good Governance, which states that, the sequestered funds. And that the personal liability stands in the institutions that is being The foreign jurisprudence, which was decided by the Supreme Court of the United States provides that a private individual which in this case a taxpayer over the coconut products have property interests as they are the ones who are disenfranchised by the system and that the farmers have the right to give back as to what was initially paid for.

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CHAPTER III RESEARCH METHODOLOGY This Chapter provides the information on how the researcher conducted the study. This will explain the method used in obtaining relevant information to the study. This section will also show the questions used by the researcher in interviewing its respondents in order to obtain additional knowledge, opinion and inputs related to the study.

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Research Design The researcher makes use of the qualitative method in conducting the study. The researcher obtained handful information relevant to the study by conducting an interview through the use of questionnaires. The researcher made use of the qualitative method because it is easy to summarize, compare and generalize. Data Gathering

Respondents of the Study

Sources:

https://news.mb.com.ph/2018/12/01/senate-ratifies-p105-b-coco-levy-fund/ https://www.manilatimes.net/state-ph-coconut-industry-must-done/346624/ https://businessmirror.com.ph/2017/05/25/government-help-badly-needed-in-coconut-industry/ http://sc.judiciary.gov.ph/jurisprudence/2012/november2012/180705.pdf

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http://agriculture.com.ph/2018/07/17/transform-coconut-farmers-from-poverty-to-prosperity-byrevising-government-policies-part-1/ https://legal-dictionary.thefreedictionary.com/trustee https://pia.gov.ph/news/articles/1012373

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