Optimizing The Cocolevy Fund Necessary Revisions To The Cocolevy Bill.docx

UNIVERSITY OF THE EAST – COLLEGE OF LAW

OPTIMIZING THE COCOLEVY FUND: NECESSARY REVISIONS TO THE COCOLEVY BILL

A THESIS SUBMITTED TO THE COLLEGE OF LAW OF THE UNIVERSITY OF THE EAST, MANILA

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF JURIS DOCTOR

ARAGONA, MELVIN P. (2013-0243-851) URSABIA, ANGELO FRANCIS G. (2016-0156-149)

2019

UNIVERSITY OF THE EAST – COLLEGE OF LAW

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. 1

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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 (PKSMMN) 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.

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UNIVERSITY OF THE EAST – COLLEGE OF LAW Statement of the Problem 1. Whether the rejection of the bill was justified as it would be a violation of the constitution? 2. What revisions should be made in order to address the justifications of the vetoed bill 2.1 What is the significance of imposing safeguards in achieving the ultimate goal of accelerating the full utilization of the coco levy assets and funds?

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 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.

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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. 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." 4

UNIVERSITY OF THE EAST – COLLEGE OF LAW 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.

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UNIVERSITY OF THE EAST – COLLEGE OF LAW CHAPTER II REVIEW AND RELATED LITERATURE 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 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.

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UNIVERSITY OF THE EAST – COLLEGE OF LAW 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.

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. 7

UNIVERSITY OF THE EAST – COLLEGE OF LAW

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 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.

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UNIVERSITY OF THE EAST – COLLEGE OF LAW 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 acquisition 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 coconut industry more competitive and most importantly to safeguard the P100 Billion Cocolevy fund in the national treasury. 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. 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

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UNIVERSITY OF THE EAST – COLLEGE OF LAW 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 case, 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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UNIVERSITY OF THE EAST – COLLEGE OF LAW CHAPTER III

RESEARCH METHODOLOGY This chapter is composed of the research design, methods of data gathering and instrument used by the researchers to acquire relevant information. The researchers also prepared questionnaires for eliciting respondents’ opinion with regard to the veto of the President over the coconut levy bill. The legal implication on Research Design In this study, the researchers used a qualitative research. A qualitative research is designe d to reveal a target audience’s range of behavior and perceptions that drive with reference to spec ific topics or issues. It uses in-depth studies of small group of people to guide and support the co nstruction of hypotheses. The results of qualitative research design are descriptive rather than pre dictive. (Qualitative Research Consultants Association, 2016) Data Gathering The researchers used the primary source in conducting this study. The primary source is an original document (i.e., they are not about another document or account) which reflects the individual viewpoint of a respondent and this represent direct, uninterpreted records of the subject of your research such as interviews, audio recordings, or internet communications on email. (University of Southern California, 2017) The data that were gathered from the respondents were based on the interview. Respondents of the Study The researchers gathered data to determine the. The data or output was gathered by conducting an interview based on questionnaire. There were at least seven (7) respondents in this study. Out of the seven (7) respondents, five (5) were coconut farmers, one (1) is an expert in constitutional law and one (1) is a legislator. The respondents shared their ideas and experiences in the coco levy bill. 11

UNIVERSITY OF THE EAST – COLLEGE OF LAW The coconut farmers were chosen by the researchers because they have the right over the proceeds. The coconut farmer is the one who directly experience the impact since it is the fruits of their labor that is being manipulated. The academe was interviewed to obtain their opinion with regard to the veto of the President. The veto power of the president is clearly discussed in constitutional law. And furthermore, the person is much more equipped in answering the legal implication of the veto power of the president. The legislator was interviewed to further know the intent of the legislator over the bill that was being brought for signage of the bill but was further vetoed. Instrument The researchers used an unstructured questionnaire. The questions were based on the stat ement of problem. The questionnaires were also used to determine their opinions and ideas of the veto of the President over the coco levy bill. It encourages participants to “use the richness of their own words to explore and describe their experiences in relation to the research question.” (Markham, Van Laar, Gibbard& Dean 200 9, p.749)

We, Angelo Ursabia and Melvin Aragona, the researchers would like to ask the following questions in order to obtain handful knowledge, understanding and opinion of the respondent about the subject matter “The Return of the Coco Levy Fund to the farmers: The legal implications of the proposed bill and its amendments.”

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UNIVERSITY OF THE EAST – COLLEGE OF LAW Name:_________________________________________________________ Occupation:____________________________________________________ Gender:_______________________________________________________ Educational Attainment:___________________________________________ For the coconut farmers who are affected by the coco levy bill. 1. Have you ever been given a stock certificate? If yes, how did the government approach you? If no, what actions have you taken to obtain such? 2. What is your idea of the coco levy funds? 3. What are the advantages of securing the stock certificates? 4. What are the disadvantages of the bill being vetoed by the president? 5. What could be the solution to justify the disbursement of the coco levy funds? 6. What safeguards should be given to ensure that the disbursement will be effected? For the legislators who made the coco levy bill. 1. What is the relevance/significance of Coco Levy Fund to the Coconut Farmers 2. Do you think the Coco Levy Fund would still be beneficial to its beneficiaries given the fact that the market and economy have changed? 3. Given the fact that a number of administration have passed, do you think the present administration would give priority? 4. What is the best solution that you think the government should do aside from monetary assistance? 5. Is the fund’s distribution to its beneficiaries the most efficient and effective solution? 6. What do you think are the possible positive and negative effects of such action?

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UNIVERSITY OF THE EAST – COLLEGE OF LAW For the academe who knows the implication of such veto to the bill based on constitutional law.

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UNIVERSITY OF THE EAST – COLLEGE OF LAW CHAPTER IV SUMMARY, FINDINGS AND DISCUSSIONS

Support to the judicious and sustainable utilization of the collected coconut levy funds is manifested in the legislative policies proposed both in the Philippine Senate and House of Representatives. The bills aim to consolidate the benefits due to the coconut farmers, especially the poor and marginalized, and to expedite the delivery and attainment of a balanced, equitable, integrated and sustainable growth and development of the coconut industry.

Recently, various bills that would give life to the decision of the Supreme Court were vetoed by the President. The President made emphasis that the said bills lack vital safeguards that will ensure that the said funds will not be compromised. In this chapter, the researchers will discuss said justifications of the veto made by the President as well as the effects of the said justifications regarding its veto.

Vetoed Bills

1. Senate Bill No. 1976 -

An Act to Further Strengthen the Philippine Coconut Authority

(PCA), Amending Presidential Decree No. 1468, otherwise known as the “Revised Coconut Industry Code of 1978, As Amended 2. House Bill No. 8552 -

An Act Reconstituting the Governing Board of the Philippine

Coconut Authority, Providing for Greater Coconut Farmers’ Representation, Amending for the Purpose PD 1468 3. House Bill No. 5745 -

An Act Establishing the Coconut Farmers and Industry

Development Trust Fund and Providing for its Management and Utilization 4. Senate Bill No. 1233 -

The Coconut Farmers and Industry Development Act

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UNIVERSITY OF THE EAST – COLLEGE OF LAW Discussion regarding the Presidential veto

1. Senate Bill No. 1976 and House Bill No. 8522 This twin bill was supposed to strengthen the Philippine Coconut Authority in promoting the integrated development and growth of the coconut industry in all aspects and ensure that farmers as well as other beneficiaries will have direct participation in its promotion was rejected by the President.

The President rejected the proposed measure, even though he acknowledged that its objective is to adopt the necessary measures to immediately address the serious problems, besetting the country, protect the socio-economic well-being of coconut farmers, and ensure that the benefits due our coconut farmers are consolidated and their delivery expedited.

Composition of the Committee under House Bill No. Senate Bill No. 1976 and House Bill No. 8522

Under Sec. 5 of House Bill No. 1976 the reconstituted PCA board have six (6) farmer representatives, four (4) from the government, and one (1) from the industry, in a bid to grant coconut farmers greater representation in the board. The six farmer representatives will come from Luzon, Visayas, and Mindanao. On the government’s side, the secretaries of Agriculture and Finance will serve as chairperson and vice chairperson, respectively. The Budget Secretary and PCA administrator will act as members.

Justification of the President

While the said bill seeks to provide greater farmer representation in the PCA board by allowing six farmer representatives to join four government representatives and one from the

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UNIVERSITY OF THE EAST – COLLEGE OF LAW coconut industry, the President pointed out that greater influence from the private sector will undermine the relevant regulations and safeguards that were established to avoid abuses.

Analysis of the justification

1. PCA is not required to seek approval from executive branch

While the bill places executive branch officials within the PCA governing board itself. In fact, the agriculture secretary will serve as board chairman, while the finance and budget secretaries are members. The PCA administrator, the President's appointee, will also sit on the board, the only body with oversight functions over a reconstituted PCA is Congress. Not requiring such approval from the executive branch supposedly makes the coco levy funds will be similar in creating pork barrel funds.

To emphasize the importance of the participation of the government, the annual disbursement from the fund will amount to ten (10) billion ($191 million). Without such mechanism that will ensure the transparent accounting of the fund will injure far more greatly the farmers than promoting their welfare.

2. PCA authority on sale, dissolution of coco levy assets jeopardizes executive branch actions on coco levy cases

A reconstituted PCA is given various functions including but not limited to the sale, disposition, or dissolution of coco levy assets without checks and balances. Worth to remember that the PCA itself has been involved into corruption issues; hence a more conservative way of asset disposition must be taken into consideration by the Congress. Moreover, the composition of the committee that will vote upon the transactions that will supposed to benefit the coconut farmers are coming mostly from the private sector.

3. PCA board composition puts taxpayers' money in hands of private individuals 17

UNIVERSITY OF THE EAST – COLLEGE OF LAW

In the vetoed bill, the 15-member PCA board will be composed of 8 government officials and 7 private persons – 6 coconut farmer representatives and one coconut industry representative. However, the President made an emphasis that he does not want any influence from the private sector as this would not be a “pro-poor” solution.

The Supreme Court doctrine was very clear on the purpose of the funds, namely, the development of the coconut industry and the benefit of all the coconut farmers, as stated in no uncertain terms in the case we elevated to them a few years ago: “The coconut levy funds are special funds allocated for a specific purpose and can never be used for purposes other than for the benefit of the coconut farmers or the development of the coconut industry. Any attempt to appropriate the said funds for another reason, no matter how noble or beneficial, would be struck down as unconstitutional.

Cocolevy Funds are not simple funds, it is a special fund designed to address the call for a more sustainable coconut industry that is designed to help our marginalized coconut farmers.

2. Senate Bill No. 1233 and House Bill No. 5745

The coconut levy fund management mechanism provided under the various bills has four main features: (1) creation of a trust fund; (2) conduct of audit and inventory of all coconut levy funds and assets; (3) creation of the coconut farmers and industry fund committee or council; and (4) establishment of coconut industry plan or framework. The trust fund shall be established to help the coconut farmers and develop the coconut industry. Its initial capitalization shall be generated from all the current recovered coconut levy funds and shall thereafter be augmented with all the proceeds, income, interests, earnings and monetary benefits from the potential privatization or disposition of other coconut levy assets and investments. The trust fund shall be perpetual in character to ensure its sustainability.

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UNIVERSITY OF THE EAST – COLLEGE OF LAW One of the important features of the policy initiatives is the recognition and inclusion of coconut farmers as one of the key decision-makers on the appropriate use and allocation of the coco levy funds. They will form part of the committee or council that will be established to manage and administer the coco levy funds including the disposition and utilization of its earnings. As the rightful owners of the coconut levy funds, farmers’ participation in the appropriation and utility of funds would ensure that they are part of and benefit from the growth in the sector.

Lastly, the bills provide for the crafting of the coconut industry plan or framework that will outline the national program to develop the industry. The development plan include among others program on enhancing productivity, rehabilitating and replanting activities since majority of the coconut trees are senile, R&D initiatives to develop science-based solutions to technological problems impeding the sector, improvement and integration of processing and marketing, and provision of infrastructures. The plan shall also include programs and activities that will directly benefit the coconut farmers such as but not limited to medical/health and life insurance services and educational plans or scholarships for students coming from families of coconut farmers.

Composition of the Committee under House Bill No. 5754

Under Sec. 12 of House Bill 5745 the Committee is composed of five (5) representatives of the government who shall be serving in ex officio capacities, nine (9) representatives from coconut organizations with three (3) each from Luzon, Visayas and Minadanao and two (2) representatives from the coconut industry sector who have considerable experience and reputable track record.

Justification of the President

President Duterte has explained that the said bill lacks vital safeguards that would ensure that funds will not be misappropriated. Considering the fact that the Committee under Sec. 12 of 19

UNIVERSITY OF THE EAST – COLLEGE OF LAW House Bill 6745 consists of nine (9) representatives from the Luzon, Visayas and Mindanao plus two (2) representatives from the coconut industry would result to 11 private individuals that would handle and decide how said funds will be disbursed.

Furthermore, under Sec. 6 of House Bill 6745, a perpetual trust fund will be created and that no portion of the trust fund will accrue to the general fund of the government which will result to a clear violation of Sec. 29 par. 3 of Art. VI of the 1987 Constitution which provides that, “all money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government.”

Likewise, the bill does not provide any limitation to the land area as this would in effect affluent members of the coconut sector rather than small scale coconut farmers.

The President also said that while the Enrolled Bill is in the common legislative agenda of the Legislative-Executive Development Advisory Council, the provisions of the bill do not reflect our ultimate goal of accelerating the further utilization of coco levy assets and funds for the benefit of our marginalized coconut farmers and the coconut industry.

Analysis of the justification

While we aim for a law that would empower the coconut farmers, a law that will endanger a fund that has long been associated with corruption will put all the hopes of our beneficiary farmers into an empty promise. In analyzing the effect of greater influence of private individuals in the disbursement and use of the said funds absent scrutiny and approval from the Executive Department will result to abuses as this would not benefit the poor farmers. It is not the greater representation from private individuals that will make the law a champion of the poor. It does not mean that since farmers in the said bill have greater voice in their own specialized sector will result to a better law. What makes a better law is to think of not only of its 20

UNIVERSITY OF THE EAST – COLLEGE OF LAW purpose but the Congress should also keep in mind on how this law will become prone to abuse in the long run. It is not that we do not have trust with our coconut farmers to handle a fund that they really own, but since this funds were already a subject of numerous issues of corruption way back from the past it is but worthy to think of a better law that will promote coconut farmers’ success but also a law that will protect them.

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CHAPTER V CONCLUSIONS AND RECOMMENDATIONS

Conclusion

The coconut industry is an important sector in the Philippine agriculture. It supports millions of Filipino farmers and workers and has been a significant contributor to the country’s economic growth. Efforts, through policies and laws, have been initiated to develop the coconut industry. These policies provided legal environment for the collection of tax or levies to serve as funds to be used for the growth of the sector. However, while the purpose of collecting the coconut levies is noble, issues on the utilization and management of the funds hindered the longterm objective of developing the coconut industry.

Currently, the coconut levy funds collected since the Marcos regime has been legally awarded to the government on behalf of the coconut farmers. Years of legal dispute to claim these funds have been settled.

With the resolution of some coconut levy fund cases, a mechanism of fund management and utilization that is viable, transparent and inclusive can affect sustainable development interventions for the sector. However, the decision on how the coconut levy funds will be used should be combined with a clear and implementable roadmap for the sector. This would ensure that investments on programs and projects will indeed achieve its goal of providing the necessary development of the coconut sector; thereby growth can be inclusive and felt by all stakeholders of the sector especially the farmers.

The researchers believe that the veto is reasonable enough against yielding to the passage of said bills into law. A balance between the control of the Government as well as hearing the voice of the coconut farmers must be achieved without abandoning such precaution to avoid misappropriation of special funds. In the end such safeguards will benefit not just the 22

UNIVERSITY OF THE EAST – COLLEGE OF LAW coconut industry itself but families awaiting what they really own and deserve. President Duterte’s rejection of the bills before him is correct because investing only in public debt is surely not in the best interest of the beneficial owners of the coco levy funds.

Recommendations

The bills vetoed by the President that would entrust the coco levy funds to the Treasury, placing them only in Philippine government bonds, and the assets to the privatization agency (PMO) would only mean outsourcing to government with participation of the private sector, completely the decision what to do with the money and who will benefit from it. This is very deceitful. The coconut farmers are being forced to give up the economic potential on their money to someone else.

The researchers believe that a need of separate farmer- and government-controlled management corporation to focus on the levy funds and assets. The PCA can remain a regulatory agency and manager of GAA funds — not the coconut levy funds and assets. Moreover, a mandatory need of government participation regarding disbursements as well as projects must be present, since from the vetoed bills what is only required is the presence of the majority of the committee but does not made emphasis of any representation of any government participation when it comes to quorum. Hence, a mere participation of majority of the private sector that has been appointed is already enough to disburse the funds as high as P 100 million. Also, the 5 years limitation on the Congressional oversight under HB 5745 must likewise be removed since limiting the power of the Congress to check the transactions entered into by the PCA would be risky since after such time, the Congress could no longer intervene with any of the projects that the PCA would do. Also, a limitation as to the land area would be vital to balance the interest of the rich and the poor farmers in the industry.

The court doctrine is anchored on recognizing the levy funds and assets as public trust with all the coconut farmers as the true beneficial owners and the development of the industry its

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UNIVERSITY OF THE EAST – COLLEGE OF LAW goal. It was a long, drawn-out fight on the part of the coconut farmers before they could come to this point of victory in the public trust fund doctrine.

Lastly, the researchers believe that distribution of Cocolevy fund is not the primary solution in helping our marginalized farmers. The researchers recommend that the government must also provide long term solutions in addressing the declining coconut industry. A creation of thriving market would help farmers to sell their products at a reasonable amount. A more sustainable farming method to avoid deterioration of crops is also suitable especially during typhoon season and in times of infestation. Best practices in farming can also help lift farmers from poverty. Farmers who plant other crops and raise livestock on the side can bring in as much as P50,000 a month per hectare. To be globally competitive, the challenge for the Philippine coconut industry is to ensure quality, volume and reliability of supply.

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UNIVERSITY OF THE EAST – COLLEGE OF LAW 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 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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