LITERATURE REVIEW

In this chapter includes a review of the Philippine coconut industry, the coconut
government policies and programs, the effects of these policies and programs to the
consumers, the effects of the government policies and programs to the traders and
exporters, and the effects of government policies and programs to the producers.

Coconut Industry in the Philippines

The coconut industry is a vital component of the Philippine economy, with coconut
production playing a significant role in the livelihoods of many rural communities. In the
municipality of Polomolok, South Cotabato, coconut producers face various challenges
and opportunities influenced by government policies and programs. This literature
review examines the existing research on the topic to provide a comprehensive
understanding of the factors affecting coconut producers in this region.

The most famous type of palm tree is the coconut tree. It is said to be the “tree of life”,
basically due to its ability to provide almost all of what is necessary for living. Its coconut
fruit provides so many uses such as water for drinking, sugar, oil, and meat. Its shell is
used as dish plate or cup for the natives and is processed as charcoal. The husks are
used as source of fire for cooking, brushes, mats, ropes, and fishnets. A fermented
toddy or drink is also made from the coconut sap. Coconut oil is saturated oil, made
from dried coconut meat, used for commercial frying and in candies and margarines, as
well as in non-edible products such as soaps and cosmetics. Other products made from
coconut are desiccated coconut, coconut cream, coconut milk, virgin coconut oil, and
coconut vinegar. Civilization has put coconut very useful nowadays. Several
technologies for making a variety of coconut-based products have been adopted that
made coconut one of the high valued crops in the Philippines. (Province of Cotabato,
2018 Coconut industry)

In the Philippines, the growth of the agricultural sector has remained weak, with its
share in the country’s gross domestic product (GDP) on a continuous decline. Over the
years 2008-2018, while the entire Philippine economy remained on a sustained growth
trajectory, with its GDP growing at an annual average rate of 5.8%, the agriculture
sector (excluding forestry) grew at a minimal rate of 1.1% and the sector’s share in GDP
continuously slid down from 12.5% in 2009 to 8.0% in 2018. Part of the reduction in
agriculture’s share in GDP is attributed to structural transformation as Philippine
economic growth is largely powered by industry and services (Brown et al., 2018).
Nonetheless, the World Bank report points to the persistently low productivity as the
more important and alarming factor behind the dwindling share of agriculture. The World
Bank notes that the growth in total factor productivity in Philippine agriculture of 32%
over the past two decades is much slower compared to Vietnam’s 73%, Thailand’s 67%,
and Indonesia’s 50%. Philippine agricultural productivity has remained low as
landholdings have become more fragmented and mechanization has not proceeded as
needed. The government has continued its traditional policy focus on rice and despite
significant resources allocated to rice farming, Philippine rice farm yields are still far
below the average for Southeast Asian countries. Further, Philippine agriculture has
failed to diversify, with the share of high-value crops increasing only marginally from
19.6% in 2000 to 20.6 % in 2018, and to 22.9% in 2019, even with the High-Value
Crops Development Act of 1995 (World Bank, 2020 [2] ). A closer look at the issues,
particularly on the local level, may give a deeper understanding of the problems, and of
what can be done to address them.

The importance of the coconut industry; First, coconut farms are reportedly present in
69 out of 79 provinces. Second, coconut farms cover some 3.3 million hectares (ha),
nearly 30% of farmlands. Third, coconut regions host among the largest number of rural
poor. Predominantly coconut areas are almost always the sites of insurgency. Fourth,
coconut products contribute nearly half of agriculture exports. Fifth, coconut lands have
among the largest potential for diversification among the major crops. Last but not the
least, it has a huge, untapped resource pool for industry development (the coconut levy
funds) which has been locked in legal battle since 1986. (Dy, Et al 2006 The Philippine
Coconut industry)

While the debates continue, the coconut industry is caught in a “time warp” of
stagnating production and, in turn severe poverty. Resource flow to the industry is
limited. And yet, this orphan child of Philippine agriculture has among the highest
potential for growth through productivity enhancement, diversification, and industry
value adding. If managed well, it can be instrumental in rural industrialization and job
creation. (Dy, Et al 2006 2006 The Philippine Coconut industry)

In 2013, Typhoon Yolanda alone damaged an estimated 2.5 million coconut trees. The
decline in productivity has placed immense strain on the livelihoods of coconut farmers.
There are approximately 347 million coconut trees in the Philippines, planted on 3.6
million hectares. Approximately 20 percent of the trees are senile, meaning their yields
are low and need to be replaced. (Lu, BJ 2023 Revitalizing the Coconut industry)

Coconut farmers are often smallholders with limited resources. Many of them are
tenants or farm caretakers, and they face an array of challenges. Firstly, the aging
coconut trees result in lower yields over time. Secondly, the prevalence of pests and
diseases not only decreases productivity but also requires costly interventions that
impact the already slim profit margins of these farmers. The coconut farmers are also
affected by the fluctuating global market prices for coconut-based products, which
create uncertainty and vulnerability. (Lu, BJ 2023 Revitalizing the Coconut industry)

There is also the issue of land tenure and lack of access to modern farming techniques,
credit, and markets, which exacerbate the difficulties faced by coconut farmers. Coconut
farmers are said to be “not bankable” since they are poor and lack the requirements to
secure loans, even from government institutions. The absence of diversified income
sources leaves them heavily reliant on the success of their coconut harvest, making
them particularly susceptible to market volatility and environmental factors. (Lu, BJ 2023
Revitalizing the Coconut industry)
Several government policies have been identified as having a direct impact on coconut
producers in Polomolok, South Cotabato. The Philippine Coconut Authority (PCA) is the
primary government agency responsible for regulating and supporting the coconut
industry. The PCA's policies and programs, such as the Coconut Farmers and Industry
Development Plan, have been found to influence the production, marketing, and overall
well-being of coconut farmers in the region.

Philippine Government policies and programs for the Coconut Industry

Crucial to an assessment of the issues plaguing the coconut industry today is an

understanding of the industry policies and programs. There are two ways by which such
policies are perceived. One view sees them as part of the government’s strategy to spur
the coconut industry’s development for the benefit of coconut farmers. The other view
rejects the first, and instead holds that the same policies and programs renown to long-
term negative implications on the industry, particularly the majority of coconut farmers.
For example, in a manifesto signed by coconut farmers and workers (Guerrero, S 2002)

The Coconut Industry Development Plan (CIDP) is a joint initiative of the

Philippine Coconut Authority (PCA) and the Pacific Community (SPC) aimed at
bolstering the coconut sector in the region. The plan focuses on improving the
competitiveness of small producers engaged in the coconut value chains and enhancing
the overall productivity and sustainability of the coconut industry. the Overall Objective
of the CIDP Program is to reduce rural poverty through the increasing of smallholders’
food production and their derived net income. The CIDP Project Purpose is to improve
the competitiveness of small producers engaged in the coconut value chains, through a
strengthened regional integration of related markets and the intensification of
production. (Montpellier, CA 2017 SPC/CIDP/PRAG07: component of CIDP project
(Coconut Industry Development for the Pacific)

The Philippine Coconut Authority (PCA) is an agency of the Philippine

government under the Department of Agriculture (from 2014 to 2018, under the Office of
the President of the Philippines and the Office of the Cabinet Secretary). It was created
on June 30, 1973, by virtue of Presidential Decree No. 232, and it absorbed and
assumed the powers and functions of the then Coconut Coordinating Council (CCC),
the Philippine Coconut Administration (PHILCOA), and the Philippine Coconut Research
Institute (PHILCORIN). The PCA is responsible for developing the coconut and other
palm oil industry to its full potential in line with the new vision of a united, globally
competitive, and efficient industry. It is the sole government agency tasked to develop
the industry to its full potential. The PCA has several programs and projects aimed at
promoting coconut-based farming systems, maintaining coconut seed farms, and
developing the coconut industry. It also has a Trade and Market Development
Department that highlights the Philippine coconut's goodness and opportunities during
conferences and other events. "It is hereby directed to be the policy of the State to
promote the rapid integrated development and growth of the coconut and other palm oil
industry in all its aspects and to ensure that the coconut farmers become direct
participants in, and beneficiaries of, such development and growth." (Article 1, Section
2, P.D 1468 or The Revised Coconut Industry Code)

The Coconut Farmers and Industry Development Act, also known as Republic Act
No. 11524, is a law that aims to support coconut farmers and develop the coconut
industry in the Philippines. The law was signed into effect on February 26, 2021, and it
sets in motion reforms in the coconut industry and provides for the efficient utilization of
the trust fund. The law creates the Coconut Farmers and Industry Trust Fund, which is a
separate fund from the regular funds appropriated to the Philippine Coconut Authority
(PCA). The trust fund is designed to support coconut farmers and the development of
the coconut industry, and it is managed by the PCA. The law also reconstitutes the PCA
Board, which is responsible for preparing and implementing the Coconut Farmers and
Industry Development Plan. The plan aims to increase productivity and income of
coconut farmers, alleviate poverty, and rehabilitate and modernize the coconut industry.
The law also provides for the reconveyance of coconut levy assets and funds to the
Republic of the Philippines within one year. The Presidential Commission on Good
Government (PCGG) will conduct an accounting and inventory of the assets, and the
Commission on Audit (COA) will audit the inventory. The law is expected to benefit
coconut farmers and the coconut industry, and it is seen as a major step towards
modernizing and industrializing the Philippine coconut sector. (DA Press Office, 2021)

The Coconut Farmers and Industry Trust Fund (CFITF) is a significant fund
created under the Coconut Farmers and Industry Development Act (Republic Act No.
11524) to support coconut farmers and develop the coconut industry in the Philippines.
The CFITF is a P80 billion fund allocated for the next five years, benefiting 2.5 million
coconut farmers and the coconut industry in general. It is a crucial instrument aimed at
revitalizing and reinventing the coconut industry, supporting coconut farmers, and
achieving social equity within the sector. The CFITF is utilized for various purposes,
including the development of hybrid coconut seed farms, training programs for farmers,
research, marketing, promotion, crop insurance, farm improvements, shared facilities for
processing, organizing and empowering coconut farmer organizations, credit programs,
infrastructure development, college scholarship programs, and health and medical
programs for farmers and their families. These allocations aim to enhance the
productivity, income, and overall well-being of coconut farmers and to modernize and
rehabilitate the coconut industry. (DA Press Office, 2022)

The Department of Agriculture (DA), through the Philippine Coconut Authority

(PCA), formally launched the Coconut Farmers and Industry Development Plan (CFIDP)
at the Quezon Convention Hall, Lucena City on June 24, 2022. The CFIDP was drafted
following the signing of Republic Act 11524, better known as the Coconut Farmers and
Industry Fund Act, of President Rodrigo Roa Duterte on February 26, 2021. The plan
was approved through Executive Order 172, which was signed on June 2, 2022. CFIDP
aims to increase the income and productivity of the 2.5 million coconut farmers in the
country; promote poverty alleviation, education, and social equity; and rehabilitate and
modernize the Philippine coconut industry. (DA Press Office, 2022)

President Ferdinand R. Marcos Jr. tackled the proposed Massive Coconut

Planting and Replanting Project 2023-2028 with officials from the Philippine Coconut
Authority (PCA) in a meeting at the State Dining Room in Malacañang Palace.
Spearheaded by the PCA, the project is anchored on a whole-of-nation approach
geared towards planting at least 100 million coconut trees throughout the country in the
next five (5) years. It is projected to develop strategies in post-harvest, processing and
marketing interventions under the Coconut Farmers and Industry Development (CFID)
Plan. The Massive Coconut Planting and Replanting Project 2023-2028 also aims to
meet the strong local and international demand for coconut products, as well as to
maximize the benefits of the coconut industry to the economy and welfare of Filipino
coconut farmers. According to the PCA, the government was able to cover 3.60 million
hectares of land with coconut trees in 2022 that accounts for 27% of the country’s
agricultural land. The Agency plans to strengthen the said project in the next 10 to 15
years to further rehabilitate the coconut industry, which is in a state of decline during the
past decade due to the negative effects of climate change and natural disasters.
Nevertheless, the Philippines remains as the top exporter of coconut products in the
world, with total export revenue amounting to US$3.22 billion in 2022. (Meeting:
Massive Coconut Planting and Replanting Project 2023 - 2028 (2023) State Dining
Room, Malacañang Palace)

Under the Republic Act 11524 or Coconut Farmers and Industry Funds Act,
Coconut farmers have the rights to be the beneficiaries of the programs provided by this
Act, it is in the reach of our palms the opportunity to be a part of this program, The
National Coconut Farmers Registry System (NCFRS) is the key to be identified as a
legitimate farmer, according to this law, The NCFRS is the government's official list of
coconut farmers in the country. It serves as the basis for identifying and providing
benefits and assistance to coconut farmers under the Coconut Farmers and Industry
Trust Fund. Coconut farmers, including farm owners, owner-tillers, growers, tenants,
tenant-workers, and farm workers, can register in the NCFRS to become eligible for the
various programs and benefits offered under the Coconut Farmers and Industry Trust
Fund Act. (darfo12-admin, DA Official website 2024)

The National Farm-to-Market Roads Network Plan (2023-2028) serves as the

government's guidepost in the implementation of key strategies that will allow
unimpeded movement of farm and fisheries produce from farm to market and, more
importantly to the tables of Filipinos. This document aims to provide a high-level
summary and an approach to guide the implementation and the review of previously
developed plans. Farm-to-market roads (FMRs) connect agricultural and fisheries areas
to markets, allowing producers to transport their goods to traders and consumers with
relative ease These roads help the farmers and fisher folks gain better prices and
broader reach for their products. FMRs also stimulate the economy and empower rural
communities. Therefore, the creation of FMRs is an essential component of the
government's efforts to develop the countryside and achieve economic growth (National
Farm-to-Market Roads Network Plan (2023-2028) | Bureau of Agricultural and Fisheries
Engineering)

The Philippine Council for Agriculture, Aquatic and Natural Resources Research
and Development (PCAARRD) is one of the sectoral councils of the Department of
Science and Technology (DOST). The Council formulates policies, plans, and programs
for science and technology-based research and development (R&D) in the agriculture,
aquatic, and natural resources sector. It also coordinates, evaluates, and monitors the
sector’s national R&D efforts. PCAARRD actively collaborates with international,
regional, and national organizations and funding institutions for joint R&D, human
resource development and training, technical assistance, and exchange of scientists,
information, and technologies. The Council implements its program primarily through its
Research and Development and Extension Consortia that are located all over the
country. (Philippine Council for Agriculture, Aquatic and Natural Resources Research
and Development (PCAARRD), n.d.)

The Coconut Farmers and Industry Roadmap (COCOFIRM) aims to provide

direction and recommendations towards sustainable development of the coconut
industry, focusing on 1) inclusive growth to lift the coconut farmers out of poverty and
improving the competitiveness and expanding the market potential of traditional and
non-traditional coconut products. Mapping, baseline and benchmark analyses of the
various coconut value chain clusters and product streams were used as bases for
recommending improvements for a more efficient supply and value chains.
Stakeholders’ participation and inputs in previous PCA consultations, summits and
workshops were reviewed. Feedback meetings and consultations through PCA were
solicited to validate the baseline analytics and recommendations. (DA official website
2021)

Coconut producers in Polomolok, South Cotabato, face a range of challenges,

including aging coconut trees, pests and diseases, limited access to credit and financial
services, and inadequate infrastructure for storage, transportation and processing.
These challenges have been found to hinder the productivity and profitability of coconut
farming in the region. However, the region also presents opportunities for coconut
producers, such as the growing demand for coconut-based products, the potential for
value-added processing, and the possibility of diversifying into other coconut-related
enterprises. Leveraging these opportunities through effective government policies and
programs could significantly improve the livelihoods of coconut producers in Polomolok,
South Cotabato. this literature review highlights the complex interplay between
government policies, programs, and the challenges and opportunities faced by coconut
producers in Polomolok, South Cotabato. Ongoing research and policy interventions
that address the specific needs of this community are crucial for the sustainable
development of the coconut industry in the region.

Effects of Government Policies and Programs to Consumers

The coconut levy fund was imposed through series of major funds, which were
enacted between the 1970s and early 1980s, namely Coconut Investment Fund (CIF)
levy, Coconut Consumer Stabilization Fund (CCSF), Coconut Industry Development
Fund (CIDF), and Coconut Industry Stabilization Fund (CISF). CIF, established in 1971
through Republic Act 6260, was created supposedly to provide medium- and long-term
financing for capital investments CCSF, on the other hand, was used to provide subsidy
for coconut-based products, fund investments in processing plants, R&D, and extension
services. CIDF was created to establish, operate, and manage the hybrid coconut seed
farm for the national replanting program, while CISF was designed to support socio-
economic and development programs (Ani and Aquino 2016), At present, the industry is
experiencing decline in the supply of coconut oil mainly due to the significant drop in the
yield and 'stagnant to negative' growth in the coconut production. In contrast, the
demand for coconut oil has been growing substantially in the recent years This can be
attributed to consumers opting for healthier options in food and other products
(Broaddus 2016)

Effects of Government Policies and Programs to traders and exporters

As coconut is regarded as one of the major vital agricultural commodities in the

Philippines, there is a huge importance of farm income, land area allocated to coconuts,
labor force employed, and foreign exchange earnings for this sector. It is one of the
country's most vital agricultural crops as indicated by its considerable contribution to
GDP. As the country's principal agricultural export, it has played an important role in
global competitiveness. (Aquino and Ani, 2016).

The floating rate policy in 1970 ushered in explicit taxation on exports in general.
Largely to siphon off the windfall profits gained by exporters with the devaluation of the
peso, the government through Republic Act (RA) 6165 explicitly taxed major exports in
general. The tax was assessed on the free on board, value of exports. Another purpose
of the export tax was to promote forward integration. The process exports were taxed
two-percentage points lower than other exports. Another purpose of the export tax was
to promote forward integration. Thus, processed exports were taxed two-percentage
points lower than other exports. in 1979, the rate for copra was increased to 7.5 percent
thereby increasing this differential. In 1980, the tax on coconut exports was lifted due to
low coconut prices. (Clarete, et al 1998)

The vertical integration program seeks to enable the coconut farmers to go

beyond their customary functions at the fan and become traders, processors, and
bankers, as well. The United Coconut Planters Bank (UCPB) and UNICOM, which
controls at least 75 percent of the country's rated milling capacity, represent the
concrete embodiment of this program. In principle, the farmers own the United Coconut
Planters Bank (UCPB) which in turns owns the UNICOM. (Clarete, et al 1998).

Effects of Government Policies and Programs to Coconut Producers

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. (Guerrero, S
2002)

In a survey done by Manuel and Maunahan (1982) among 420 coconut farmers,
only seven or a low 2 percent claimed to have received insurance benefits (see Table
5.2). However, in a letter Enrile (1981) (seeAnnex 5.2) states that the “insurance
program…is highly advantageous” since a farmer is insured uniformly at P10,000 each
on a non-medical, non-selective basis…regardless of his age, volume of copra
production and without any medical examination. Moreover, the insurance policy is
participating policy, which means that the insured farmers share in the profits”. Enrile
further claims that 95 percent of those insured with COCOLIFE are above 50 years, and
that in a short span of four years, it has paid 113,433 death and five disability claims – a
total of P132,849,072.00. (Guerrero, S 2002)

Theoretical Framework

The producer’s theory is concerned with the behavior of firms in hiring and
combining productive inputs to supply commodities at appropriate prices. Two sets of
issues are involved in this process: one is the technical constraints, which limit the
range of feasible productive processes, while the other is the institutional context such
as the characteristics of the market where commodities and inputs are purchased and
sold. (Ishaq Nadiri 1982)

Any policy evaluation that incorporates factors beyond efficiency and

redistribution necessarily violates the Pareto principle by allowing for the possibility that
the new system of evaluation supports policy changes in which all members of society
are made worse off. For some policies, researchers have sought to identify the benefits
of a particular government intervention, say, the Occupational Safety and Health
Administration's safety standards for workplaces, noting that imple- menting the policy
generates enforcement and compliance costs that need to be included in a full
assessment. (Kaplow and Shavell, 2001) Microeconomic policy evaluations have been
strengthened by advances in econometric modeling, greater computational capabilities,
experimental economics, and the growing availability of data sets covering a wide range
of consumers' and firms' economic behavior. Any policy evaluation amounts to a
counterfactual analysis where the eco- nomic effects of a public policy are isolated by
using a multivariate analysis to hold constant all other variables that are unrelated to the
public pol- icy but that could affect policy outcomes. (Harberger 1999)

Government policy in the form of economic regulation can improve economic

welfare by setting more efficient prices for the monopoly provider and preventing other
firms from entering the market, albeit with adverse incentives for innovation. Optimal
prices could be set either at marginal cost with a subsidy or tax that enables the regu-
lated monopolist to earn a normal return or at Ramsey prices that satisfy a break-even
constraint. (Under Ramsey pricing, the percentage markup of prices above marginal
cost is inversely related to consumers' demand elas- ticities to minimize the welfare loss
from inefficient substitution.) (Clifford W, 2006)

Policy evaluation is therefore an absolutely critical stage in the policy process whereby
we can determine whether a policies effects are intended or unintended and whether
the results are positive or negative for the target population and society as a whole
(Theodoulou and Kofinis, 2004). In essence, policy evaluation is the process used to
determine what the consequences of public policy are and what has and has not been
achieved.
 CONCEPTUAL FRAMEWORK

The present study has determined the effects of the Government policies and
programs on the coconut farmers of Polomolok, South Cotabato in terms of four (4)
indicators. This is shown in Figure 1. The underlying manifestations of the government
policies and programs to the local coconut producers are in terms of changes in (1)
volume of production, (2) number of tobacco growers, (3) area planted, and (4) number
of enterprises.

With the implementation of such government policies and programs, the volume of
coconut production is expected to increase. In the present-day study, the volume of
production refers to the kilograms of dried coconut kernels or “copra” produced by
coconut producers in Polomolok, South Cotabato from 2014 – 2023. Another effect of
these government policies and programs is the potential to increase the number of
coconuts growers.
 Change in
Volume of
Production

Change in
number of Effects of
Change in
Coconut government
number of
Producers policies and
Enterprises.
programs

Change in
Area
Planted
Fig 1. Schematic diagram of possible effects of government policies and programs

Hypothesis of the Study

This study has determined the changes in the volume of production, number of
growers, area planted, and number of enterprises before and during the implementation
of the government policies and programs are statistically significant. Below is the
statement of the null hypothesis.

Ho; There is no significant difference in the volume of production, farm size, and the
number of enterprise before and during the implementation of the aforementioned
government policies and programs.