COCO LEVY FUND

INTRODUCTION
Coconuts play a vital role in the Philippine economy. According to
figures published in December 2009 by the Food and Agriculture
Organization of the United Nations, it is the world's largest producer of
coconuts, producing 19,500,000 tonnes in 2009. (http://www.iyff.ph/coco-
levy-fund/ retrieved April 12, 2016)

The Philippine coconut industry is responsible for 25% of the volume

of the agricultural sector, and it is reportedly present in 68 of the 79
provinces of the country. Next to sugar, coconut products are also the
leading agricultural export of the Philippines, with 37 products and by-
products that were exported to 114 countries. The major exports are crude
and refined oil, copra meal, desiccated coconut, activated carbon, and oleo-
chemicals. About one-third of the Philippine population depends mainly on
coconut production for its livelihood. (http://www.iyff.ph/coco-levy-fund/
retrieved April 12, 2016)

LEGAL BEGINNINGS OF COCO LEVY

The legal beginnings of the levy could be found in the Republic Act
6260, the Coconut Investment Act, of 19 June 1971. The act calls for the
creation of a Coconut Investment Fund and a Coconut Investment
Company (CIC). The objective of the CIC was to: (a) To fully tap the
potential of the coconut planters in order to maximize their production and
give them greater responsibility in directing and developing the coconut
industry; (b) to accelerate the growth of the coconut industry and other
related coconut products from the raw material stage to the semi-finished
and finally, the finished product stage; (c) to improve, develop and expand
the marketing system; and (d) to ensure stable and better incomes for
coconut farmers.(http://www.iyff.ph/coco-levy-fund/ retrieved April 12,
2016)
In 30 June 1973, President Marcos created the Philippine Coconut
Authority through P.D. 232. The PCA's mandate was to "to promote
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, and to provide continued leadership and support in the integrated
development of the industry." The said decree also consolidated the
responsibilities and activities of the Coconut Coordinating Council (CCC),
the Philippine Coconut Administration (PHILCOA), and the Philippine

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Coconut Research Institute (PHILCORIN), under one
office.(http://www.iyff.ph/coco-levy-fund/ retrieved April 12, 2016)

COCO LEVY FUND CASES

The Coco Levy Case (Sandiganbayan Civil Case No. 33) is actually
subdivided into a total of eight cases involving different parties and
properties. Arguably the most important case is Case No. 33-F, which
involves 51% of the shares of mega-conglomerate San Miguel
Corporation. This majority stake at San Miguel has been further subdivided
into three separate litigations, each of which reaching the Supreme Court in
highly contentious proceedings.(http://www.iyff.ph/coco-levy-fund/
retrieved April 12, 2016)
The first case involved 4% of San Miguel shares, which, in the case
of San Miguel Corporation vs. Sandiganbayan, was awarded by the
Supreme Court to the government.
The second case, Republic of the Philippines vs. Sandiganbayan and
Eduardo Cojuangco Jr., promulgated on April 12, 2011, involved a 20%
block that the Supreme Court, voting 74, awarded to Eduardo
Danding Cojuangco, et. al.which further stated, that:

The definition of ill-gotten wealth was reiterated in Presidential

Commission on Good Government v. Lucio C. Tan, where the Court said:

On this point, we find it relevant to define ill-gotten wealth. In

Bataan Shipyard and Engineering Co., Inc., this Court described ill-
gotten wealth as follows:

Ill-gotten wealth is that acquired through or as a result of

improper or illegal use of or the conversion of funds
belonging to the Government or any of its branches,
instrumentalities, enterprises, banks or financial institutions, or
by taking undue advantage of official position, authority,
relationship, connection or influence, resulting in unjust
enrichment of the ostensible owner and grave damage and
prejudice to the State. And this, too, is the sense in which the term
is commonly understood in other jurisdiction.

Concerning respondents shares of stock here, there is no evidence

presented by petitioner that they belong to the Government of
the Philippines or any of its branches, instrumentalities,
enterprises, banks or financial institutions. Nor is there evidence
that respondents, taking undue advantage of their connections or
relationship with former President Marcos or his family, relatives and
close associates, were able to acquire those shares of stock.

The most recent High Court pronouncement, Philippine Coconut

Producers Federation, Inc. (COCOFED) vs. Republic of the Philippines,

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where the Court, voting 110, declared that the remaining 27% of San
Miguel is owned by the government. (Note: The 27% had been diluted to
24% due the governments failure to subscribe to the increased authorized
capital stock of San Miguel)(http://www.iyff.ph/coco-levy-fund/ retrieved
April 12, 2016)

COCO LEVY FUNDS PARTAKE THE NATURE OF TAXES

(FORCED LEVY)
According to the Supreme Court in COCOFED vs. Republic of the
Philippines, GR Nos. G.R. Nos. 177857-58, January 24, 2012,the coconut
levy was imposed in the exercise of the States inherent power of taxation.
As we wrote in Republic v. COCOFED:

Indeed, coconut levy funds partake of the nature of taxes, which, in

general, are enforced proportional contributions from persons and
properties, exacted by the State by virtue of its sovereignty for the support
of government and for all public needs.
Based on its definition, a tax has three elements, namely: a) it is an
enforced proportional contribution from persons and properties; b) it is
imposed by the State by virtue of its sovereignty; and c) it is levied for the
support of the government. The coconut levy funds fall squarely into these
elements for the following reasons:

(a) They were generated by virtue of statutory enactments imposed on the

coconut farmers requiring the payment of prescribed amounts. Thus,
PD No. 276, which created the Coconut Consumer[s] Stabilization
Fund (CCSF), mandated the following:

a. A levy, initially, of P15.00 per 100 kilograms of copra resecada

or its equivalent in other coconut products, shall be imposed on every first
sale, in accordance with the mechanics established under RA 6260,
effective at the start of business hours on August 10, 1973.
The proceeds from the levy shall be deposited with the
Philippine National Bank or any other government bank to the account of
the Coconut Consumers Stabilization Fund, as a separate trust fund which
shall not form part of the general fund of the government.

The coco levies were further clarified in amendatory laws,

specifically PD No. 961 and PD No. 1468 in this wise:

The Authority (PCA) is hereby empowered to impose and collect

a levy, to be known as the Coconut Consumers Stabilization Fund Levy,
on every one hundred kilos of copra resecada, or its equivalent
delivered to, and/or purchased by, copra exporters, oil millers,
desiccators and other end-users of copra or its equivalent in other
coconut products. The levy shall be paid by such copra exporters,
oil millers, desiccators and other end-users of copra or its
equivalent in other coconut products under such rules and
regulations as the Authority may prescribe. Until otherwise prescribed by
the Authority, the current levy being collected shall be continued.

Like other tax measures, they were not voluntary payments or

donations by the people. They were enforced contributions exacted on pain
of penal sanctions, as provided under PD No. 276:

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 3. Any person or firm who violates any provision of this Decree
or the rules and regulations promulgated thereunder, shall, in addition to
penalties already prescribed under existing administrative and special
law, pay a fine of not less than P2,500 or more than P10,000, or suffer
cancellation of licenses to operate, or both, at the discretion of the Court.

Such penalties were later amended thus: .

(b) The coconut levies were imposed pursuant to the laws enacted
by the proper legislative authorities of the State. Indeed, the CCSF was
collected under PD No. 276.

(c) They were clearly imposed for a public purpose. There is

absolutely no question that they were collected to advance the
governments avowed policy of protecting the coconut industry.
This Court takes judicial notice of the fact that the coconut industry is
one of the great economic pillars of our nation, and coconuts and their
byproducts occupy a leading position among the countrys export
products.

Taxation is done not merely to raise revenues to support the

government, but also to provide means for the rehabilitation and the
stabilization of a threatened industry, which is so affected with
public interest as to be within the police power of the State.

Even if the money is allocated for a special purpose and raised by special
means, it is still public in character.

The coconut levy funds were sourced from forced exactions decreed
under P.D. Nos. 232, 276 and 582, among others, with the end-goal of
developing the entire coconut industry.

SUPREME COURT ISSUED TRO IN RELATION TO COCO LEVY

EXECUTIVE ORDERS
In a report in rappler.com dated July 1, 2015, the Supreme Court
temporarily stopped the implementation of two executive orders
on the privatization and reconveyance of the P74.3-billion
($1.65-billion) coco levy fund that the Court had recently
declared to be public funds.

"The Court issued a Temporary Restraining Order effective

immediately and until further orders from the Court against the
implementation of Executive Order (EO) Numbers 179 and 180," SC
spokesman Theodore Te said Tuesday, June 30, 2015.

EO 179 requires the inventory, privatization and reconveyance and in

favor of the government of all coconut levy assets, including but not limited
to the shares of stock in the United Coconut Planters Bank (UCPB),
Coconut Industry Investment Fund (CIIF) Companies and CIIF Holding
Companies, as well as the 5,500,000 San Miguel Corporation shares
registered in the name of the Presidential Commission on Good
Government (PCGG).

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 EO180 ordered the immediate transfer and reconveyance of the
coconut levy assets to the government and use them for the Integrated
Coconut Industry Roadmap and the Roadmap for Coco Levy.

EOs unconstitutional

In a 33-page petition filed on May 20, the Confederation of Coconut

Farmers Organizations of the Philippines led by Charles Avila accused
Aquino of committing grave abuse of authority when he issued EOs 179 and
180 without the approval of Congress and the Sandiganbayan anti-graft
court.

Petitioner humbly submits that this judgment [by the Supreme

Court], without prior legislative imprimatur, cannot be hastily and
prematurely implemented by the President through mere EOs. In passing
the assailed EOs, the President acted in excess of his constitutionally
mandated powers, Avila said.

Avila added that the twin executive orders can only cause the further
exclusion of farmers from the fund and open it to abuse.

The Court ruled that the coco levy funds were public funds in two
decisions (Republic vs Sandiganbayan First Division and Eduardo
Cojuangco Jr. in April 2011, and Cocofed vs Republic in January 2012).
(http://www.rappler.com/business/211-governance/98020-supremecourt-
tro-coco-levy-executive-orders retrieved April 11, 2016)

COCO LEVY FUND AND THE 2016 PRESIDENTIAL ELECTIONS

The tandem of Mayor Rodrigo Duterte and Senator Alan Peter
Cayetano signed a manifesto promising 3 things if they will elected in
office, to wit:

1. In the first 100 days of governing, they will make sure coconut
farmers benefit from the coco levy fund.
2. Aside from the coco levy fund, they will make sure there will be
more funds for infrastructure, research, and marketing to
strengthen the coconut industry.
3. They will support effort to recover the remaining funds.

The unrecovered funds refer to the 20% remaining shares in San

Miguel Corporation (SMC) controlled by Eduardo Danding Conjuangco,
Jr. that he allegedly bought using the coco levy funds.
(http://www.rappler.com/nation/politics/elections/2016/127671-duterte-
cayetano-return-coco-levy-fund-100-days retrieved April 12, 2016)

On the other hand,as reported on March 10, 2016 in the website

inquirer.net, Presidential candidate Sen. Grace Poe said that the
government and not businessman Danding Cojuangco Jr., should be
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blamed for the delay in deploying the multibillion-peso coconut levy fund
for the benefit of farmers.

In a press conference in Candelaria, Quezon, Poe said she herself was

getting impatient that the coconut farmers have yet to benefit from the coco
levy funds more than four decades after they paid the forced tax.

But the problem is that Danding Conjuangco doesnt control it

anymore because all the shares (bought with the coco levy fund) are now
with the government, said Poe.

She said that the coco levy funds should have been immediately given
to the farmers after the Supreme Court made a final ruling on the coco levy
assets in 2012, specifically which of the San Miguel Corp. shares, 31 percent
should go to the government and 20 percent to Cojuangco.

But the government had other ideas on how to deploy the coco levy
funds which explains why it hasnt been distributed to the rightful
beneficiaries, she said. (http://newsinfo.inquirer.net/772211/grace-
defends-danding-on-coco-levy retrieved April 10, 2016)

Subsequently, in a press conference in Quezon City on March 14,

2016, the Confederation of Coconut Farmers (Confed), represented by
national chairman Efren M. Villaseor, declared their support specifically
for Poe and Marcos who are from different political parties which was
reported in inquirer.net on March 15, 2016.

Villaseor said Confed decided to support Poe due to her doable

and concrete programs for coconut farmers, while Marcos was
simply the preferred vice presidential candidate of most members of the
group. Villaseor described Poes running mate, Chiz Escudero, as a poor
second to Marcos.

In a statement, Villaseor described their group as the largest and

broadest alliance of major coconut farmers organisations in the country,
comprising 90 percent of more than 3.5 million coconut farmers in the
country.

Villaseor lamented that Poe was placed in a bad light after she
pointed out that the P72 billion coco levy fund was no longer in the hands
of Eduardo Danding Cojuangco Jr., but with the government.

We fully support the statement of Sen. Grace Poe Mr. Danding

Cojuangco is a non-issue here because we have already won the cases we
filed against him to recover the coco levy fund. The whole fund is under the
control of the government, Villaseor said.

The Supreme Court ordered that the coco levy fund be deposited in
an escrow account to either Landbank, the DBP [the Development Bank of
the Philippines] or the UCPB [United Coconut Planters Bank]. However,

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despite such ruling, Malacaang refused to place the amount in any of the
banks and instead the amount was placed in the Bureau of Treasury. It is
our position that Malacaang should be held in contempt of the Supreme
Court ruling for defying such an order, Villaseor explained.

Villaseor added that after 40 years of struggle to get their hands on

the coco levy fund and four years after they won the case, coconut farmers
have yet to use a single centavo of the coco levy fund as it is being held by
the government and is in danger of being used for purposes other than for
the benefit of our coconut
farmers.(http://newsinfo.inquirer.net/773727/coco-farmers-throw-
support-behind-poe-marcos retrieved April 12, 2016)

THE PHILIPPINE COCONUT INDUSTRYand THE

MALAYSIAN PALM OIL INDUSTRY

In a report in the Manila Bulletin website, Dato Lee Yeow Chor,

chairman of the Malaysia Palm Oil Council said that Malaysian palm oil
firms are looking into the Philippines for their expansion programs in
southern Mindanao. Malaysian investors also consider palm oil as a peace
commodity because investments in this sector can help restore peace in the
troubled Mindanao region.
Malaysia is the worlds second largest producer of palm oil but is
running out of lands for its expansion programs. This industry has also
reached a maturity level in Malaysia.
We are looking outside for expansion opportunities and southern
Mindanao has been spotted as a good place because we have similar climate
and soil, but there are also other factors to consider like political security,
infrastructure and land ownership, he said.
Since palm oil has a 25-year cycle, Lee said investors would like to
ensure to be assured of a long term lease preferably for a 60-year period.
They are also looking at the infrastructure development in the country.
Despite these challenges including the unsuccessful palm oil
plantation in southern Mindanao 20 years ago, Lee expressed optimism of
more Malaysian investments in the Philippines.
Trade and Industry Undersecretary Zenaida C. Maglaya told reporters
that under the Philippine Palm Oil Industry Roadmap, which was
spearheaded by the private sector, the Philippines has only around 70,000
hectares of land being planted to oil palms in Mindanao of which only
around 50,000 hectares are productive. Current investments in the oil
palm sector is placed at P200 million only.
Maglaya said that this expansion program should be able to create
around 700,000 jobs during the 2014-2023 period. With this huge

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development, Maglaya expressed hopes for collaboration between Malaysia
and the Philippines.
Data from the Bureau of Agricultural Statistics showed that the
Philippines is producing only 40,000 MT of crude palm oil and about
3,000 metric tons of palm kernel oil in 201. The local production is almost
consumers domestically. The per capita oil and fats consumption in the
country is placed at 10 to 12 kilograms.
In 2014, the Philippines imported 760,000 metric tons of oils and fats
of which 620,000 tons are palm oils. Of the countrys total palm oil
imports, Malaysia supplied the Philippines with the bulk of 500,000 tons.
Malaysia exported 70 million MT of palm oil in 2014.
The industry roadmap stated that the countrys average shortage of
palm oil is 400,000 MT. If the Philippine population will reach 120 million
in 2017, the country will be importing an estimated 1 million metric tons of
palm oil with an import value of P35 billion. (http://www.mb.com.ph/2-
3b-needed-for-palm-oil-industry-development/#pGilTl1qIv5SdsB2.99
retrieved April 13, 2016)
With this, it is safe to say that this proposed expansion in the
Philippines of the Malaysian Palm Oil Industry is a threat to the coconut
industry which has been in existence for a long period of time and is said to
proven and tested. It must be taken into consideration that there had been
an unsuccessful palm oil plantation in southern Mindanao 20 years ago but
the Malaysian Government is still pushing this expansion particularly in the
area. The Philippine Government should not make radical decisions
regarding this matter that could eventually lead to the downfall of our
coconut industry and to our entire economy, as well.

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