A step for Marcos, a leap for coconuts
Under international pressure, Philippine President Ferdinand Marcos has ordered a dismantling of the state monopoly over the nation's largest export industry -- coconuts. With nearly one out of three Filipinos dependent on production of various coconut products, the order would seem to signal a major shift in the deeply indebted economy. Also due for dismantling is the monopoly controlling the second-largest export industry: sugar.
But critics doubt whether Mr. Marcos will truly disrupt the coconut industry, long controlled by one of his closest friends.
Announced Jan. 21, Mr. Marcos's order is part of a series of economic restructuring steps worked out with the International Monetary Fund (IMF) in return for a $615 million standby credit.
Some critics see President Marcos's move, which allows a free trade of coconut oil, as merely ``paying lip service'' to the IMF -- and will, if anything, restrict the channels for exporting coconut oil.
The coconut industry is the Philippines' largest foreign-exchange earner. In 1984, coconut exports brought in $802 million, with coconut oil accounting for $582 million, or 73 percent.
But since the United Coconut Oil Mills (Unicom) was set up by presidential decree in 1979, the biggest beneficiary has been Eduardo Cojuangco Jr., a close friend of President Marcos's and reportedly the country's second wealthiest man -- after the President. Mr. Cojuangco is president of Unicom.
Until Marcos's announcement, Unicom, which owns only four coconut mills, controlled the channels for export of coconut oil. The new decree authorizes the country's 71 coconut oil mills to export their products directly to the world market.
The IMF required the government to undertake reforms to restructure the troubled economy, mainly in agriculture and industry.
``Crony capitalism'' -- whereby friends of the President are given special favors, such as monopoly power in coconut and sugar -- stuck out as a sore thumb.
A group sympathetic to farmers, the Forum for Rural Concerns, called the dismantling mere ``paper lifting.'' A group spokesman said coconut farmers still lack resources to export copra and coconut oil. ``They [farmers] still have no choice but to sell their produce to the giant coconut mills.''
A prominent industry leader said the decree has not really eradicated the monopoly. Rather, it imposed more restrictions on potential exporters. He pointed out three controversial features of the presidential decree:
Export prices will still be determined and regulated by government. The decree provides that the export of coconut products be subject to government rules ``to ensure that these are sold at competitive prices.''
Millers and planters are encouraged to form cooperatives. The establishment of cooperatives, he explained, will necessarily favor the large millers and planters since they have the resources.
``They will be in dominant position, will have greater control in the marketing of coconut products, leaving out the small farmers again . . . as in the previous setup.''
There will be no new investment in the industry, as in the addition of copra crushing or refining capacity, without government approval.
He pointed out the difficulty for new investors to enter the coconut industry, since the decree lists 71 millers. He thinks this will ``freeze'' the industry and make it hard to take advantage of new technology.
Rolando de la Cuesta, chairman of the Philippine Coconut Authority (PGA), flatly denied these criticisms. He said the essence of the decree is ``less but not zero government intervention and greater access to the world market. There will be no predetermination of prices, and exporters are now free to trade.''
Unicom president Cojuangco said in a press statement Jan. 21 that the monopoly was ``well on the way of attaining its goal of rationalizing the manufacturing and marketing of coconut products until the IMF interfered.''
Mr. de la Cuesta's office released guidelines for coconut export early this week. Exporters say they are very broad and are waiting for finer details.
An air of anticipation pervades the industry as well as government. Prime Minister C'esar Virata said the government is adopting a wait-and-see attitude on what would transpire after the dissolution of the monopoly. That dissolution is expected to take three months, according to Defense Minister Juan Ponce Enrile, a Unicom board member.
The coconut industry was ``rationalized'' by the government in 1979 because it was perceived to be in a precarious state. At that time, exporters buying from farmers were trying to outbid each other, leading to short-term cycles of artificially high prices for coconut products. The industry was seen by government to be on the brink of ``financial collapse.''
``Unicom was a good concept, it served its purpose,'' Mr. Enrile said. ``But government should now try the side of the critics. . . .''
He admitted having suggested that dismantling as long as a year ago. In fact, he would have supported opposition bills pending in the National Assembly seeking the same, he said.
Opposition members of parliament from Quezon Province, known as coconut country, are likewise unsure of what may come after the supposed tearing down of the monopoly. They see the presidential move as still riddled with questions.
One of those questions has to do with the coconut levy collected over a nine-year period from farmers who sold their coconut products to mills. The levy, which began in 1973, is administered by the government-controlled United Coconut Planters Bank (UCPB) and is estimated at $568.5 million. UCPB gives loans and insurance to the largest millers, but does little for the small farmers. Cojuangco is also president of UCPB.
Oscar Santos, newly elected opposition MP from Quezon Province, is demanding a public accounting and audit of the coconut levy. The money was supposed to have been placed into a fund controlled by the coconut farmers themselves. But the levy was used to create UCPB and Unicom. Due to popular clamor, the levy was suspended by the President in 1982.
While the fund from the levy and monopoly were technically owned and controlled by 1 million coconut farmers, critics say the money has never been accounted for. Nor did the farmers have any say in what Unicom decided to pay them for their products.
The monopoly on Philippines' second-largest export, sugar, is also slated for the block. On Feb. 5, the National Economic and Development Authority recommended that the National Sugar Trading Corp (Nasutra), headed by Marcos's fraternity brother Roberto Benedicto, be dismantled. The President ended Nasutra's domestic (but not export) monopoly in March 1984, but the company still dominates the market. (Critics claim Nasutra secretly imports sugar and dumps it on the local market to drive new traders out of business and retain its monopoly.)
Sugar prices have fallen to their lowest point in 17 years. On top of this, Mr. Benedicto is accused by critics of gross mismanagement of the trading company, allegedly losing planters and millers some $250 million through speculation in the mid-1970s -- and making planters pay for the losses. Critics also allege that Nasutra has charged producers three times the legitimate trading expenses.
A parliamentary subcommittee is investigating these charges.