c l o b a l developments a e e e c t i n c t i i k competitiveness OF TIIK COCONUT INDUSTRY IN l’HIUITINKS

Alicia V. Foilteclisi

1. Production

Coconut remains the major agricultural crop of the Philippines. One-third of the Philippine population depends on the coconut industry, directly or indirectly.

PHILIPPINE COCONUT INDUSTRY Production Magnitudes (as of Y 2005) ❖ Total cocal area : 3.21 M hectares ♦> No. of bearing trees : 328.6 M ❖ Productivity : 43 nuts/tree/yr. ❖ Nut production : 14.056 B/yr or 2.68 M M l , copra

The area devoted to coconut plantations is 3.21 million hectares, with 68 out of 70 prov inces throughout the country planted to coconut. Number of bearing trees now stand at over 328.6 million. Average productivity is 43 nuts per tree/year. Nut productivity is highest in Davao, which averaged 63 nuts/tree. The largest landholdings are located in Mindanao which accounts for 51% of total Philippine coconut landholdings.

In Y2005 production reached 14.06 B nuts or 2.68 M M l in copra equivalent. I his corresponds to a 12.83% increase over Y2004. In the last 5 years, production has remained stagnant and averages 2.3 M M l in copra terms.

2. Processing Plant Production Capacities

Rated Category No. Capacity (M I ) Oil mills 63 4.56 M Refinery 41 1.568 M Desiccated Coconut 10 144.405 Oleochemicals 8 376.360 Activated carbon 8 38,340 CS Charcoal Producers 15 78,058 Coco-diesel (blended) 1 60.000 Coir 39 25.795 VCO 100 2.931 The table above shows the production capacity oflhe Philippines for major products.

' Manager, Market Development Department. Philippine Coconut Authority (PCA). 5th Floor R D Building, Diliman. Quezon City, Philippines.

100 3. l'lili/.iition

Approximately 86 % of total production is used to produce copra, all of which is crushed lor oil production 78% is exported. 12% processed into chemicals and 10% into manufactured oil. The remaining coconuts are used for desiccated coconut and virgin coconut oil production and the rest is consumed as food nuts.

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4. Exports

The year 2005 was a good year for exports. Volume increased by 20% at 2.144 M MT compared with 1.702 M MT in 2004. Values likewise increased by I 5% at US$ 967 M I OB. Major coconut products being exported arc coconut oil. desiccated coconut, copra meal, coco chemicals, activated carbon and coco shell charcoal. Ml \UI < >F M Vl< >R l'l« IS i n H > I \l, (■(H O N I' I I' \IM >R I V XRNINCS 2005

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101 The non-traditional export products likewise performed well in Y2005. 129 countries were penetrated. Biggest gainers were toilet/bath soap, coconut milk, coco gel and shampoo.

4.1. 2001-2005 EXPORT PERFORMANCE

For the last Y2001-2005, exports registered a marginal negative growth in volume largely due to sharp declines in coco oil exports. This decrease, however, was offset by a 12.49% increase in values. Growth for overall exports both in volume and value were noticeably high in Y2003 considering that both traditional and non-traditional coco exports performed well and registered gains.

RP Exports of Coco Products (000 MT)

Commodity 2001 2002 2003 2004 2005 2006* Traditional 2390 1668 2045 1686 2022 1123 Copra 16 3 0 0 0 0 Coconut oil 1418 945 1184 959 1152 607 Copra meal 753 385 510 364 430 244 DCN 80 107 107 106 126 65 Activated Carbon 30 31 33 33 34 18 CS Charcoal 18 20 18 29 26 12 Noil-Traditional 59 99 126 106 122 59 Coco-chemicals 59 99 126 106 122 59 *Jan-June only

RP Exports of Coco Products (USSM fob)

Commodity 2001 2002 2003 2004 2005 2006* Traditional 551 505 670 747 858 417 Copra 3 1 0 0 0 0 Coconut Oil 418 353 505 578 657 314 Copra Meal Cake 36 25 36 31 27 13 Desiccated Coconut 63 95 96 100 127 66 Activated Carbon 28 28 31 32 39 20 Coco Shell Charcoal 4 4 3 6 7 3 Non-traditional 72 81 92 98 109 50 Coco-chemicals 40 51 61 66 75 27 Nata de coco 8 6 5 5 5 Coco milk (liquid & powder) 7 7 5 6 7 Toilet/bath soap 4 5 6 5 4 Shampoo 2 1 2 4 2 VCO 0.02 0.09 0.41 0.55 2 Coco handicrafts 1 1 2 2 2 Others 26 24 24 26 28 Total Export Earnings 623 587 762 845, 967 467 *Jan-June only

102 Value-wise the traditional coconut products performed positively with a growth rate of 12.64%.

Among the traditional products, coconut oil remained the biggest contributor to this increase followed by desiccated coconut, copra meal and activated carbon. The biggest market for coconut oil is Netherlands followed by the USA. The emerging markets were Malaysia, Japan, PROC, Italy and Indonesia.

Desiccated coconut performance was stable over the five year period. Its growth rate exhibited gains at 6.24%. It has penetrated 106 foreign markets. Among its major markets were USA, United Kingdom, Boznia & Herzegovinia, Netherlands and Taiwan.

Activated carbon's export earnings likewise grew within the same period at the rate of 8.87%. The major buyers were Japan, USA, France, Singapore, and United Kingdom.

Likewise, the non-traditional coco products performed positively both in volume and value in Y2003. At present, there are 38 non-traditional coco products exported by the Philippines with 129 destinations in the world market.

The non-traditional coco products export was led by coco-chemicals whose major markets are USA, Netherlands, PROC, Japan and Taiwan. For the past 5 years, other products that emerged winners were toilet bath soap, processed nata de coco, coco milk powder, shampoo and liquid coco milk.

Virgin coconut oil export started only in Y200I with a volume of 1.80 ML. In Y2005, its export volume reached 475 MT with a corresponding export value of US $1.612 million, a phenomenal performance for a newly introduced product both in the domestic and foreign markets. With only the USA as its major foreign market in Y2001, todate, it has reached 13 destinations such as the countries in Europe, Asia & Pacific, Middle East and South Africa.

Toilet bath soap has penetrated 72 countries. Among its major markets were Indonesia absorbing 23.72% of this product's exports, Singapore with I 1.35%. Malaysia with 10.36%, Taiwan with 4.86%, Hongkong with 8.73% and the USA with 5.57%.

Processed nata de coco or coconut gel has reached 57 countries in the world market. For the past 5 years, it earned an average of US $ 5.308miilion. Its major markets were Japan absorbing 81.15%, USA, 6.17%; Korea, 4.37%; Hongkong, 1.36% and Singapore, 1.28%.

Coconut milk in both powder and liquid forms were favorably accepted in the world market. Coco milk powder contributed an average of US $3,485 million in the country's foreign export earnings. It has reached 44 destinations among which are Belgium, Japan, Italy, Taiwan and Hongkong. Belgium absorbs 43.69%, Japan shared 22.63%, Italy with 9.94%, Taiwan with 3.58% and Hongkong with 3.23%.

Liquid coco milk earned an average of US $ 2.439 million for the same period. Among its major markets are Japan eating a slice of 33.48 %, USA with 33.44%, Hawaii with 5.63 %. Netherlands with 3.47 % and Canada with 3.42 %.

103 Shampoo contributed an average of US $ 2.710 million within the past five years. It had penetrated 67 destinations the world over. Its major buyers were our neighbors in Asia, namely, Malaysia with a share of 35.28 %. Taiwan with 10.73 %, Hongkong with 9%, Vietnam with 8.47% and New Zealand with 3.42 %.

Other promising coconut products were the other coco chemicals such as refined glycerine and alkanolamide. Other products with good market prospects were macapuno, assorted coconut handicrafts, processed coir products such as soil erosion control materials and coconut chips.

5. New Products Developed/Being Developed

5.1. Coco-Diesel

R & D efforts on the development of coco-diesel started a few years back initially to stem spiraling prices of petro-diesel and to diversify product use of coconut oil as a marketing strategy. Research efforts were intensified with the passage of RA 8749 also known as the Clean Air Act. The government embarked on a program utilizing coco-diesel for diesel-fueled vehicles. Complementing RA 8749 is Senate Bill 2226 or the Bio-Fuels Act. The bill calls for the mandatory 1% blend of coco methyl ester to diesel fuel commercially sold in the country. In her State of the Nation (SONA), Pres. Arroyo called for the immediate passage of the Bill.

The first bio-fuel center for both the pre-blended coco-diesel and future ethanol gas is now being constructed right within the compound of PCA. This is a commercial diesel station of Flying V.

5.2. Filtered Coconut Oil as Fuel

After observing the use of coconut oil as engine fuel in Majuro, erstwhile Administrator Jesus Emmanuel Paras introduced it in the Philippines. A coconut filtering plant has been set up in PCA and this fuel is being used to run the PCA Administrator's official vehicle and a shallow tube well pump, on an experimental basis.

5.3. Coconut Sap Sugar

Production of this product has reached commercial level but the volume still falls short of the demand requirement. It is used not only as a healthy gourmet sugar but also in health resorts, spas and beauty salons as skin exfoliating agent.

5.4. Coco Breakfast Cereal

This is a functional food using coconut flour.

104 6. Major R & I) Initiatives

6.1. Development of an Integrated Food Safety System

In response to the global requirement for safe foods and feeds, PC A is working at a scheme towards this end. The blue print of the Integrated Food Safety Program has been prepared and its implementation being undertaken. PCA and the Food Development Council are jointly working on the development of the certification system.

Additionally, generic manuals for the Hazard Analysis Control Points arc being prepared. This system will cover fresh young coconut juice, frozen coconut milk, virgin coconut oil, bottled nata de coco and coconut flour.

6.2. Quality Improvement of Selected Coconut Products

v EU-Tradc Related Technical Assistance Program (EU-TRTA)

The PCA is one among the government agencies i.e., the Department of Agriculture and the Bureau of Customs, assisted by the European Union through its Trade Related Technical Assistance (TRTA) program. Assistance is through trainings of personnel involved in the implementation of regulatory and sampling procedures and product standards for coconut products, upgrading of laboratory facilities used in the chemical & micro-biological analysis of coconut products, among others. The program involves improvement of the quality of copra and other coconut products such as Virgin coconut oil, Refined, bleached & deodorized (RBD) coconut oil, copra meal and animal feeds, etc. in order to comply with EU product standards, sanitary and phytosanitary requirements. The EU-TRTA program also assists in the promotion of trade facilitation and customs reforms and in the understanding and implementation of WTO Agreements.

❖ Development of national product standards (VCO, DCN, Coir)

6.3. Food Fortification Program

In compliance to RA 8976 also known as the Philippine fortification Act of 2000, the Food Fortification Program was launched. An integral component of this program is the authority being given by the Dept, of Health to food manufacturers to use the DOF1 “ Sangkap Pinoy” seal for products which have passed a set of defined criteria.

This law covers “all imported or locally processed foods as food products for sale or distribution in the Philippines” . In the case of cooking oil, all brands are required to be vitamin - A fortified. PCA monitors compliance. At present, 49 refineries have already complied.

6.4. Cadang-cadang Containment Program

This program is aimed at preventing the spread of the cadang-cadang viroid to non­ in fested coconut areas and therefore assures foreign markets that coconuts being exported are free from the cadang-cadang virus.

105 6.5. SPS Quarantine Program

This is an expansion of the function of the Bu. of Plant Industry through dcputization of trained PCA Quality Control Officers to manned designated quarantine outposts to monitor & contain pest-infected coconut products (i.c., cadang-cadang. brontispa longissima, aflatoxin-infected copra)

6.6. Advocacy to Promote Coconut Products

This is done through sustained information campaign and continuing monitoring of market developments and market intelligence gathering.

7. Threats

1. Brontispa Longissima- Program on the abatement and proliferation of Brontispa longissima Gestro determines the extent of crop losses due to coconut leaf beetle infestation. Under this program, action teams are organized and trained. Massive information dissemination is likewise undertaken. 2. Non-tariff barriers * Sanitary and phytosanitary requirements ■ Contaminants ■ Perceived effect of cadang-cadang viroid on humans 3. Disinformation campaign against coconut oil. 4. Tariff- Under the Common Effective Preferential Tariff (CEPT) tariff reductions up to 0% will implemented in Y2007. Lower-priced competing products such as palm oil can enter at 0% tariff to the disadvantage of higher priced coconut oil. 5. Development of other sources of lauric acid such as cuphea and high lauric canola. 6. Development of new variety of competing oilseeds that would be almost transfat-free such as soybean and high oleic, low linolenic sunflower.

8. Problems/Concerns

Problems/Concerns Recommendations Planti ng/replanting of early-bearing high-yielding varieties

Rehabilitation through fertilization, 1. Stagnant to declining yield of coconut irrigation & establishment of shallow tube wells

Processor-farmer outsourcing production contract

106 I

Establishment of provincial/municipal seed gardens 2. Inadequate supply of quality planting Development of high-yielding materials varieties through application of bio­ technology Protecting coconut stands against pests & diseases through integrated pest management

3. Poor adoption of farming technologies Establishment of model farms Diversification of farm products > Integrated farming system > Processing of coconut “ waste” 4. Low farm income products such as husks & coconut shells Improved copra quality Adoption of tested modern farming technologies Establishment of community-based livelihood program Whole nut concept Establishment of integrated processing centers (as much as 5. High cost of inputs, labor and possible) within radius of adequate freight/handling supply sources Harmonization of freight schedules for export shipment Active participation or memberships 6. Non-tariff barriers imposed by some in international organizations and importing countries Conferences such as CODEX Initiation of Trade Agreements Policy-based investment environment Attractive investment package

7. Lack of investments for the processing of Streamlined documentary high value, market - oriented products requirements Adequately-funded focused coconut investment promotion Strengthening of commercial/consular linkages

Infusion of adequate resources and 8. Lack of sustained institutional market funds to support programs on promotion > product packaging > participation in trade fairs and expositions, conferences > sustained aggressive information dissemination endeavors

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