PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES Working Paper 85-01 A REVIEW OF WELFARE ISSUES IN THE COCONUT INDUSTRY by Sylvia H. Guerrero* • The views expressed in this study are those of the author (s) and do not necessarily reflect those of the Institute. • Dean, Institute of Social Work and Community Development, University of the Philippines, Diliman, Quezon City. A REVIEW OF WELFARE ISSUES IN THE COCONUT INDUSTRY INTRODUCTION PAGE Chapter One HISTORICAL BACKGROUND 2 Introduction/Beginnings of Increased Production/Coconut Export: Early History to Pre-World War I/Export to the United States: World War II Effects/Continued US Protection/Continued Export to the US: World War II Effects/Stabilization of the Coconut Industry, 1950-1960/Local Control of the Industry: 1970s/Summary Chapter Two THE STRUCTURE OF THE COCONUT INDUSTRY 6 Introduction/Local Marketing/Exploitation of Coconut Farmers Perpetuated/Capital and Profit Share as Profit Determinants/Regulatory Policies vis-à-vis Market Activities/The Agricultural Sector/Farm Incomes/Export and Processing Sector/Export Orientation/Shift from Copra Exports to Coconut Oil Exports/Coconut Oil Milling/Conclusion Chapter Three THE COCONUT FARMER 18 Introduction/Review of Definitions/The Number of Coconut Farmers/ The Socio-Economic Conditions of the Coconut Farmers/Income/ Expenditures/Education/ Housing/Conclusion Chapter Four POLICIES AND PROGRAMS OF THE COCONUT INDUSTRY 29 Introduction/Industrialization Policy and the Coconut Industry/Legal Background of Industry Programs/Sources of Literature/Description of Industry Programs/The Subsidy Program/National Coconut Replanting Program/Welfare Programs/Scholarship/Insurance/The Vertical Integration Program/Other Support Programs/Program/ Administration/Philippine Coconut Producers Federation (COCOFED) Philippine Coconut Authority (PCA)/United Planters Bank (UPCB)/ Sources of Funds/Conclusion 2 PAGE Chapter Five THE IMPACTS OF COCONUT INDUSTRY PROGRAMS 41 Introduction/Scholarship Benefits: Pros and Cons/Insurance Benefits/ The Replanting Program/Program Rationale/Program Implementation/ Equity Implications/The Use of Hybrids/Other Issues Against the Levy/ Accounting/Levy Incidence and Equity Implications/Industry Revitalization/ Conclusion Chapter Six SUMMARY AND CONCLUSIONS 59 ANNEXES 62 REFERENCES 3 PROJECT STAFF Coordinator Dr. Sylvia H. Guerrero Research Associates Elmer M. Ferrer Maureen C. Pagaduan Ma. Theresa V. Tungpalan Research Assistants Lourdes Padilla Roger de la Cruz Clerical Staff Cesar L. Advincula Victoria R. Bitanga Mateo B. Cacapit Natividad T. Caparros Evaswinda M. Mendoza Onofre S. Pandela Leygio A. Tiston The project staff wishes to acknowledge Emmanuel Esguerra of the School of Economics, University of the Philippines for his helpful comments and suggestions. Also Aida Santos Maranan and Agnes Mabalot for their editorial assistance. 4 A REVIEW OF WELFARE ISSUES IN THE COCONUT INDUSTRY Introduction This paper is a review of welfare-related issues in the Philippines’ coconut industry. It surverys the literature dealing with various aspects of the coconut industry in an attempt to highlight the impact of these on the well-being (i.e., in terms of incomes, consumptions, employment, etc.) of the coconut farmers and laborers. Two things motivated this research. For quite some time now, community organizers (faculty members and students) from the Institute of Social Work and Community Development (ISWCD) have been dealing with coconut farmers in various localities. A research output such as the present could help the Institute’s practitioners broaden their perspective, familiarize themselves with the issues at a macro level, and thus facilitate the process of understanding the more immediate problems confronted in the actual field work. Also, by identifying current gaps in research, this review could help pinpoint areas for future investigation by social scientists. The other reason for this study is that farmers and laborers in the coconut industry constitute the second most important group, after rice and corn farmers, in terms of poverty incidence (World Bank 1980). This findings was based on data from the 1971 Family Income and Expenditure Series (FIES); it would be interesting to find out how the situation has changed through time especially since various programs have been implemented in the coconut industry purportedly to improve the conditions of the farmers. Few studies actually deal directly with the conditions of coconut farmers. David (1977), Cornista (1981), Manuel and Maunahan (1982) and the MOLE-NEDA (1982) study are some of these. Most make a passing reference to farmers’ welfare in the context of a discussion of some policy or programs being implemented in the industry. We can cite here the studies made by Clarete and Roumasset (1982), Tiglao (1981), ILMS (1981), and David (1982). The ones we have found to have discussed in great detail the plight of coconut farmers and laborers were more of position papers espousing one view or another view. Where helpful to a point being made we have also included such non-academic type of literature in this review. We have also included primary data collected from various interviews conducted during field visits. In the process of doing this review, we have tried to cover a lot of ground for the reason that most of the issues affecting coconut farmers and laborers are likely to be buried in numerous discussions of some other aspect of the coconut industry. In fact, even the term “coconut farmer” has varied meanings; we devote a portion of this review to that. The interrelatedness of the various aspects of the programs and policies of the coconut industry under discussion has necessarily produced a tendency for the sections to overlap in certain occasions. This case is especially so in reference to chapters four and five. The first chapter of this study gives a brief historical background of the coconut industry from its early beginnings during the Spanish colonization to the years immediately after the war. Chapter two discusses the structures of the industry (local marketing, the agricultural sector and the industrial sector). Chapter three investigates the various literature that deal with the problem of identifying who the coconut farmer is. Chapter four delineates the various policies and programs of the industry, focusing on the welfare programs launched by the most important institutions in the coconut industry. Chapter five deals with the impacts of the various policies and programs on the socio-economic status of the farmers and laborers. Finally, chapter six provides a summary of the most pertinent points taken up in the previous chapters and tries to identify the areas what need further investigation. 1 CHAPTER ONE HISTORICAL BACKGROUND Introduction The history of the Philippine coconut industry is extensively documented in three major works: The Philippine Coconut Industry: Growth and Change, 1900-1965 by George Hicks, The Philippine Coconut Industry: Looking Into Coconut Export Oriented Agricultural Growth by Rigoberto Tiglao and the Countryside Report by the Luzon Secretariat for Social Action (LUSSA). The work of Hicks summarizes the major physical features of the industry and includes a detailed description of domestic and international policies in the coconut industry. Further, Hicks distinguishes three major periods in the coconut industry. These are: 1) 1900-1916, when the main export was copra and Europe was the major market; 2) 1916-1940, which was characterized by the sustained dominance of the American market; and 3) 1940-1965, characterized by a steady decline of the US market share. Tiglao in his book attempts to trace, define and describe the forces behind the formation and development of the coconut export industry, and more importantly, describes the forms of class and national exploitation engendered by these forces. 1.1 Beginnings of Increased Production Coconut was introduced in the Philippines by immigrants from the Indo-Malayan archipelago in the early twelfth and thirteenth centuries. Coconut has been used by Filipinos for food, wine, vinegar and oil when the Spaniards came. In 1642, by virtue of a decree passed by Governor-General Sebastian Corcuera, Filipinos were enforced to increase production of coconut. The decree set a quota for the tribal chiefs (200 trees) and the serfs (100 trees), with a penalty of P1,000.00 fine and/or imprisonment for failure to comply. This increased production, however, did not reach the level of commodity production; it merely supplied the demands of the Spaniards for fuel and rigs of the galleons, as Tiglao (1981) discusses; a system of protection from Philippine coconut oil and desiccated coconut, as well as other exports like sugar and abaca. While the tariff imposed on these products raised the cost of non-Philippine agricultural imports, the US maintained a cheap supply of raw materials from the Philippines. 2 The tariff system increased the levy on coconut export in the countries which were not American colonies. Thus, US firms operating in the Philippines made use of coconut-based raw materials. By 1926, 99 percent of US demand for desiccated coconut was being supplied by the Philippines, with 90 percent of the export companies under the ownership of the United States. Even as the American agricultural and industrial sectors succeeded in passing the Act of 1934 in their effort to restrict the entry of Philippine coconut products which completed with US produce, the effects of the taxes